Saying you ‘sell to financial services’ is a broad term. One firm could sell exclusively to quant hedge funds below £100m AUM. Another could sell to tier 1 banks with strong fixed income desks.
These broad & generic terms lead to a lack of focus, intelligence & lead fintechs to treat everyone the same. This can cause mediocrity in the product, commercial focus & pricing.
Success in one area of the financial markets often leads to a need to cross this chasm as firms look to accelerate growth.
As a capital markets fintech, the temptation will be to look to the other side of the fence. From sell to buy-side or vice versa.
Selling to both the buy & sell-sides need not be a bad thing. Approaching them with a one-size-fits-all approach could prove disastrous.
3 things to look out for when attempting to cross the buy & sell-side chasm:
1. Do you approach the buy & sell-sides in the same way?
The buy & sell-sides are two very different animals. Terminology that works in one may be a foreign concept to another. For example, the sell-side might hire tech consultants on a regular basis but the buy-side demand vendors. Speaking to a hedge fund about the tech you can build will land differently to a large tier 1 bank.
2. Are you underestimating the different drivers in each segment?
Asset management firms & hedge funds are driven by very different things. The buy-side itself has over 20 sub-segments.
From value drivers to fee structures, each of these sit at different ends of various spectrums. Hedge funds at a certain size are driven almost exclusively by alpha. The strategy is key within that, for example, a new trading platform that only impacts ease-of-use for a fund that trades select names that they research extensively is likely worthless.
3. Are you carrying bias from your past experience?
Perhaps you have had a successful history in a prop shop. Has the market moved on since you were a trader? Do you have a pre-determined agenda that you are driving against the market?
Do not let your past history & success give you misplaced confidence. This could lead to limiting beliefs as you miss the market opportunity.
We often hear people speak about the ‘long sales cycle’ in financial services.
Is this a message you are treating everyone the same & not understanding the differences that the market demands?
We’ve interviewed over 50 buy-side CTOs. If you want to hear more about our findings contact us here.