Six fortunate bank technology startup companies will receive money and help next year from several large New York City banks through a FinTech Innovation Lab.
Starting in January, CTOs and CIOs from Bank of America, Barclays Capital, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and UBS will hear pitches from financial services technology startups and choose six to receive a $25,000 award and technical help from the banks through a FinTech Innovation Lab run by the New York City Investment Fund created by created by KKR founder Henry Kravis and technology-consulting firm Accenture.
The participating banks each invested $1 million in the fund 14 years ago to help create jobs in New York City. "For this, the banks expected no financial return -- they did it for the benefit of the city," says Maria Gotsch, president and CEO of the New York City Investment, who spoke to Bank Systems & Technology in an interview yesterday.
For the Innovation Lab, the startups have to meet two requirements. "We're less interested in an idea on a piece of paper -- we're interested in people who have at least an alpha version of the technology, and there has to be a team of at least two people," Gotsch says. Beyond that, the startups have freedom to create whatever they want. "We wanted to leave it open and track the best entrepreneurs and the best ideas," although the fund did suggest a few areas of interest, including mobile technology, data management and analytics, security, and social media, Gotsch says. "We want technology that at the end of the program is close to being actually used by large financial institutions," she says.
Applications are due January 31. Banks and venture capital funds will review the applications and pick the ones in which they are most interested. A shortlist of people will be invited in to make a presentation to the bankers and venture capitalists. The six winning entrepreneurs will be notified by the end of March and begin a twelve-week lab experience on May 2. Each winner will receive $25,000, workspace and a mentor from one or two banks.
In addition to seed money and support, these entrepreneurs will gain access to user groups within the institution while they're developing their product. "They will have extraordinary access to input during the product development phase, which is extraordinarily valuable to the entrepreneur," Gotsch says. Depending on the types of technologies chosen, the program will also provide speakers knowledgeable about relevant topics such as regulation, security and how clearinghouses work.
At an investor day at the end of July, the winners will present their company and technology to a broad audience including the participating banks and many members of the venture capital community.
Sticking with the original mission of this fund, "the idea is to create jobs and to really grow the financial services technology sector," says Gotsch. The U.S. financial services industry employs nearly 233,000 technology workers, including approximately 25,000 in New York City.
According to Celent, the banking and securities and investment industries in North America will spend over $14 billion on external software in 2011.