A QUALITATIVE RESEARCH ON SELECTED PERFORMANCE INDICATORS FOR INVESTMENT DECISION PROCESS: A FRAMEWORK FOR FINTECH STARTUPS IN TURKEY

Abstract

Purpose- The purpose of this study is to help investors in their decision-making process in funding Financial Technology (FinTech) Startups by developing a framework of key performance indicators for effective financial resource allocation. A better understanding of investors’ point of view for FinTech Startups is also targeted. Methodology- The study is conducted as structured face-to-face interviews with a sample of four angel investors and four venture capitals. In the interviews, selected indicators from the literature and finance industry experts’ declarations were presented in four groups: Firm, Owner/Founder, Financial or Marketing/Procurement Characteristics. It was asked whether these indicators were used in the decision-making process or were there extra indicators not listed here. Findings- The widely accepted indicators were found shareholder structure, experience of major decision makers, increase in net sales, existence and amount of VC or other funding, number of clients, serving to consumers or businesses and expected developments in the startup’s sector. Conclusion- Results of this study may help investors in their decision-making process in funding FinTech Startups FinTech startups are also targeted to have a better understanding of investors’ point of view. This study contributes to the common understanding on investment dynamics in Turkish FinTech ecosystem, which is expected to have a major role in FinTech industry.

Keywords

• Financial technology,venture capital,angel investor,investment decision,performance indicators

References

1. 360Leaders (2016). FinTech Map 2016. Retrieved from http://360leaders.net/wp-content/uploads/2016/09/FinTech-Case-Study_Web_Final.pdf
2. Accenture (2015, December 5). The Future of FinTech and Banking: Digitally disrupted or reimagined? London: Accenture. Retrieved from http://www.FinTechinnovationlablondon.co.uk/media/730274/Accenture-The-Future-of-FinTech-and-Banking-digitallydisrupted-or-reima-.pdf
3. Accenture Report (2016, December 3). FinTech and the evolving landscape: landing points for the industry. Retrieved from http://www.FinTechinnovationlabapac.com/media/1157/FinTech_Evolving_Landscape_2016.pdf
4. An J., Jung W., Hee-Woong K. (2015, December 4). A Green Flag over Mobile Industry Start-Ups: Human Capital and Past Investors as Investment Signals. PACIS 2015 Proceedings, Paper 67. Retrieved from http://aisel.aisnet.org/pacis2015/67
5. Anon (2013, December 23). Facebook Banking Takes Off In Turkey. Retrieved from www.pymnts.com/uncategorized/2013/facebook-banking-takes-off-in-turkey
6. Arner, D.W., Barberis, J., Buckley, R.P. (2015). The Evolution of FinTech: A New Post-Crisis Paradigm?. University of Hong Kong Faculty of Law Research Paper No: 2015/047.
7. Åstebro, T., Bernhardt, I. (2003). Start-up financing, owner characteristics, and survival. Journal of Economics and Business. Volume 55, Issue 4, pp. 303-319.
8. Baum, J.A.C., Silverman, B.S. (2004). Picking winners or building them? Alliance, intellectual, and human capital as selection criteria in venture financing and performance of biotechnology startups. Journal of Business Venturing. 19, pp. 411–436.

9. Belli, M. (2016). Banking and FinTech: Developing a FinTech Ecosystem in Istanbul Learning Lessons From London. e-book, retrieved from http://bkm.com.tr/wp-content/uploads/2016/02/Banking-and-FinTech.pdf
10. Boteler, D. (2014, December 4). FinTech: a new definition, What is FinTech?. Grovelands Recruitment. Retrieved from www.grovelands.co.uk/FinTech/#sthash.J9WKQ6Ft.dpuf
11. Canko, S. (2017). FinTech Finans Dünyasını Yeniden Şekillendiriyor. FinTech İstanbul Booklet from Capital Monthly Business and Economics Magazine. January 2017.
12. Capital (2017-1). Türkiye FinTech’te Önemli Bir Yer Edinecek, Interview with İhsan Elgin. FinTech İstanbul Booklet from Monthly Business and Economics Magazine. January 2017.
13. Capital (2017-2),. Infographic and Research Tables. FinTech İstanbul Booklet from Monthly Business and Economics Magazine. January 2017.
14. Cassar, G. (2004). The financing of business start-ups. Journal of Business Venturing. 19. pp. 261–283.
15. Cassar, G. (2014. Industry and startup experience on entrepreneur forecast performance in new firms. Journal of Business Venturing. 29. pp.137–151.
16. Cengiz, D.D. (2017). Fintek Hareketi Bir Devrim Mi?. Fintechtime Finance and Technology Magazine. N.4. Winter 2016/17. pp. 120-121.
17. Chang, C. (2013, December 4). Portfolio Company Selection Criteria: Accelerators vs Venture Capitalists. CMC Senior Theses. Paper 566. Retrieved from http://scholarship.claremont.edu/cmc_theses/566
18. Cornish, D. (2013, December 4). Europe’s hottest startup capitals: Istanbul. Retrieved from www.wired.co.uk/magazine/archive/2013/11/european-startups/istanbul
19. Csaszar, F., Nussbaum M., Sepulveda M. (2006). Strategic and cognitive criteria for the selection of startups. Technovation. 26,.pp.151–161.
20. Cusumano, M.A. (2013). Technology Strategy and management Evaluating a Startup venture. Communications of the ACM. Vol. 56. No. 10, pp. 26-29.
21. Davila, A., Foster G. (2005). Management Accounting Systems Adoption Decisions: Evidence and Performance Implications from Early-Stage/Startup Companies. The Accounting Review. Vol. 80. No. 4. pp. 1039–1068.
22. Drucker, V. (2013, December 4). Global Finance (2013) Special Report: Turkish Banking. December 2013, London: Global Finance. Retrieved from www.gfmag.com/magazine/december-2013/special-report-turkish-banking
23. Eckhardt, J.T., Shane, S., Delmar, F. (2006). Multistage Selection and the Financing of New Ventures. Management Science. Vol. 52, No. 2, pp, 220-232
24. Ensley, M.D., Hmieleski, K.M., Pearce, C.L. (2006). The importance of vertical and shared leadership within new venture top management teams: Implications for the performance of startups. The Leadership Quarterly. 17. pp. 217–231.
25. Ensor, B. (2012, December 4). Digital Banking Innovation In Turkey. Retrieved from http://blogs.forrester.com/benjamin_ensor/12-09-18-digital_banking_innovation_in_turkey
26. Ernst & Young (2013). Ernst & Young’s attractiveness survey, Turkey 2013: The shift, the growth and the promise. Istanbul: EYGM Limited, EYG no. AU1579.
27. Falik, Y., Lahti T., Keinonen, H. (2016). Does startup experience matter? Venture capital selection criteria among Israeli entrepreneurs. Venture Capital. 18:2, pp. 149-174.
28. Groenewegen, G., Langen, F. (2012),. Critical Success Factors of the Survival of Start-Ups with a Radical Innovation. Journal of Applied Economics and Business Research JAEBR. 2(3). pp. 155-171.
29. Haddad, C., Hornuf, L. (2016, December 4). The Emergence of the Global FinTech Market: Economic and Technological Determinants. CESifo Working Paper Series No. 6131. Retrieved from http://ssrn.com/abstract=2830124
30. Independent Report by EY for HM Treasury (2016, December 4). UK FinTech On the cutting edge: An evaluation of the international FinTech sector 24 Feb 2016. Retrieved from https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/502995/UK_FinTech_-_On_the_cutting_edge_-_Full_Report.pdf
31. ING International (2015). The rise of mobile banking and the changing face of payments in the digital age, Mobile Banking, Social Media and Financial Behaviour. ING International Survey, April 2015, Amsterdam.
32. Karabayır, M.E., Gülşen, A.Z., Çifci, S., Muzaffar, H. (2012). Melek Yatırımcıların Kararlarında Girişimci Odaklılığın Rolü: Türkiye’deki Melek Yatırımcılar Üzerine Bir Çalışma. Ankara Üniversitesi Siyasal Bilgiler Fakültesi Dergisi. Cilt 67. No. 2. s.69-93.
33. Kłobukowski P., Pasieczny J. (2016, December 4). Business Models Of Startups In Cooperation With Mature Companies – Obtaining Orders And Building A Leading Position On The Market. Zeszyty Naukowe Politechniki PoznańSkiej Nr 68 Organizacja i Zarządzanie. Retrieved from http://zeszyty.fem.put.poznan.pl/
34. KPMG and H2 Ventures, (2016, December 4). 2016 FİNTECH100 Leading Global FinTech Innovators Report. Retrieved from https://home.kpmg.com/au/en/home/insights/2016/10/FinTech-100-leading-global-innovators.html
35. Letstalkpayments, (2016, December 4). 22 FinTech Accelerators Fostering Innovation in the Financial Services Industry. Retrieved from https://letstalkpayments.com/22-FinTech-accelerators-fostering-innovation-in-the-financial-services-industry/
36. MacMillan, I. C., Siegel, R., Narasimha, P. S. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1). pp. 119-128.
37. Marion, T. (2016). 4 Factors That Predict Startup Success, and One That Doesn’t. J. Harvard Business Review Digital Articles. 5/3/2016. pp. 2-5.
38. MasterCard (2016, December 22). MasterCard Mobile Readiness Country Comparisons. Retrieved from http://mobilereadiness.mastercard.com/country-comparisons
39. McKinsey & Company (2016, December 4). Cutting Through the FinTech Noise: Markers of Success, Imperatives For Banks, Feb 2016. Retrieved from http://www.mckinsey.com/industries/financial-services/our-insights/cutting-through-the-noise-around-financial-technology
40. Miloud, T., Aspelund, A., Cabrol, M. (2012). Startup valuation by venture capitalists: an empirical study. Venture Capital Vol. 14. Nos. 2–3, pp. 151–174.
41. Munch, J. (2014, December 4). What is FinTech and why does it matter to all entrepreneurs? July 2014. Retrieved from https://www.hottopics.ht/stories/finance/what-is-FinTech-and-why-it-matters/
42. Nanda, R., Rhodes-Kropf M. (2013). Investment cycles and startup innovation. Journal of Financial Economics 110,.pp. 403–418.
43. National Digital Research Centre (NDRC) (2014, December 4). So what is FinTech? March 2014. Retrieved from www.ndrc.ie/2014/03/FinTech
44. Nofsinger, J.R., Wang W. (2011). Determinants of start-up firm external financing worldwide. Journal of Banking & Finance 35. pp. 2282–2294.
45. Nuscheler D. (2016, December 4). Regularly change a running system! An analysis of stage-specific criteria for attracting venture capital and changing the likelihood for getting funded. 3IFABS best poster award. Retrieved from http://ifabs.org/assets/stores/1206/userfiles/3IFABS%20Best%20Poster%20Award%20-%20Daniela%20Nuscheler%2C%20TU%20Dortmund%20University%2C%20DE.pdf
46. Parker, S.C. (2009). The Economics of Entrepreneurship. Cambridge University Press. NY USA.
47. Price Waterhouse Coopers (2016, December 4). Blurred lines: How FinTech is shaping Financial Services. Global FinTech Report, March 2016. Retrieved from http://www.pwc.com/gx/en/advisory-services/FinTech/PwC%20FinTech%20Global%20Report.pdf
48. Rozen, H. (2015). The Relationship Between Firm Performance and the Market’s Trust in Security Estimates: Evidence from the Public Venture Capital Industry. Journal of Accounting and Finance. Vol. 15(4). pp.183-195.
49. Sironi, P. (2016), FinTech Innovation: From Robo-Advisors to Goal Based Investing and Gamification, UK: Wiley.
50. Staniewski, M. W. (2016). The contribution of business experience and knowledge to successful entrepreneurship . Journal of Business Research. 69. pp. 5147–5152.
51. The Banks Association of Turkey (BAT) (2016, December 4), Internet and Mobile Banking Statistics. Istanbul: BAT September 2016. Retrieved from https://www.tbb.org.tr/tr/bankacilik/banka-ve-sektor-bilgileri/istatistiki-raporlar/59
52. Wimmer, J.P.J. (2016). Unraveling the entrepreneurial process: Exploring the role of business models in opportunity-creation. Unpublished Masters thesis. Retrieved from http://purl.utwente.nl/essays/69422, March 2016, Uni of Twente, Berlin.
53. Yazici, S, (2017). Yatırımcıların İlgisi Artıyor, Interview with Selim Yazıcı. FinTech İstanbul Booklet from Capital Monthly Business and Economics Magazine. January 2017