The Ins-and-Outs of the DCU FinTech Innovation Center
DCU was one of the first credit unions to start rapidly adopting technology for their members as well as for their employees; some of those accomplishments included offering a website and implementing check depositing through their smartphone app. Nowadays, nearly every major bank has these features, but DCU was among the first financial institutions to take these steps.
It is this “push forward” mentality that also trickles down into the DCU FinTech Innovation Center, which is one of the premier FinTech accelerators in the Boston tech scene. The Center is an equity free accelerator that doesn’t work as just a corporate lab for DCU, but one that has larger ambitions for this specific tech sector in Boston.
“The goal of the Center is to help startups get market traction and into the FinTech ecosystem,” said Managing Director Vasilios Roussos. “[It’s about] supporting the development of new technologies and the notion that this effort will create a rising tide. If the tide rises, it will lift all boats DCU.”
How the Center came together
The “Center 1.0” started out as less of an accelerator and more of a method for DCU to connect to relevant startups, which complimented their other innovation efforts. This also included sponsoring business competitions at universities across the Greater Boston area. Not only were they connecting to a younger generation, but around this time DCU started to host internal “innovation” contests for those who can come up with fresh ideas for the company’s internal workings.
While this was fantastic for the day-to-day operations and for possibly obtaining new clients out of the college students, it wasn’t until 2013 that DCU leadership started to take note of the success of accelerators in the Boston tech space.
“DCU’s Senior Management started to look at how MassChallenge, and innovation were taking off and spreading all throughout Boston,” said Roussos. “They thought it was awesome, but also noticed that there wasn’t a place for financial institutions to connect with the startup world.”
It was this idea that led to the brainstorming of a place where DCU could interact with FinTech startups. DCU management appointed David Araujo as Senior VP of Technology & Innovation. Araujo was tasked with devising a plan to move the Marlborough, MA-based credit union into the budding Boston tech sector. In order to plug DCU into the burgeoning Boston FinTech space, Araujo contacted the folks at Workbar.
From 2014 to 2016, the Center acted as a coworking space where FinTech startups were provided access to mentorship provided by DCU. The Center was gaining relevance within the FinTech world (they were one of the first coworking spaces to have blockchain-based companies) and investors, like angel investor David Chang, started to work out of it. The credit union wanted to take another step forward and bring these startups and their respective technologies to the forefront of the Boston tech scene.
In the Winter of 2016, the DCU FinTech Innovation Center welcomed its first cohort of eight FinTech startups. It was initially called the DCU Center of Excellence and Financial Services, before shortening the name to the DCU FinTech Innovation Center.
“We brought in eight companies for our first cohort. When we started the application drive we had no idea what the results would be or what would happen be when we made a concerted effort to develop a brand and get out there in the broader technology world,” remembers Roussos. “When it came time to start interviewing candidates, we had 50+ startups apply which was way beyond our expectations.”
What the DCU FinTech Innovation Center is all about
At its core, the DCU FinTech Innovation Center is an industry-specific non-profit accelerator for pre-seed FinTech startups. They are also agnostic and open for working with other organizations in order to help both the center and their startups grow as businesses.
“What we want to focus on is companies that are trying to figure out what their go-to-market and product strategy is. Since a lot of FinTech companies typically work with enterprises, it can take a while to figure that part out,” Roussos said. “We expect that and we work with startups for a year to help them figure that out over time and help them make the right connections to move forward.”
The Center will have two cohorts per year and will recruit 10 startups in each Fall and Summer. Companies that are part of the Center are typically broken down into three categories:
Banking/Payments - Companies trying to create technology to help banks or develop applications involving the exchange of money
Advanced Technology - (Usually) startups utilizing complicated tech or hardware such as AI, or the ever-present blockchain
Opportunistic - The broadest of the three, these are startups who are doing something Roussos describes as “compelling.”
When the startups come into the accelerator, the company will stay on board for a year, getting in contact and working with DCU’s laundry list of experts, as well as prominent FinTech experts in the Boston tech scene.
From a startup's perspective...
I spoke with one startup from each of the three categories Roussos described earlier, and received an opportunity to learn what it was like to experience being in the accelerator firsthand. One common theme between them was “collaboration” and being able to work with one another in a more personal way, since they are all in the same space.
KingsCrowd is part of the Summer 2018 cohort, and has an interesting backstory. Co-Founder and CEO Chris Lustrino always worked in financial services and started KingsCrowd as a FinTech news blog. Everything changed when he received a cold call from Netcapital Chairman (and former Napster CEO) John Fanning, who urged him to continue the blog but in a different direction.
The company is now a third-party research and recommendation platform devoted to equity crowdfunding. KingsCrowd is providing users a more “under the hood” view of what startups they could potentially invest in. The startup utilizes a subscription model for its users that are looking to start putting money into what could be their first investment.
As a first-time startup founder, Lustrino has been able to work off of others experiences, while sharing what he knows about the equity crowdfunding world.
“I’ve only been in it for a few months, but I’ve already spoken to three companies that are looking to do equity crowdfunding, and I was able to have a conversation with them. On the other hand, I was looking for a developer, and I spoke with those same companies about what I should do to get a good backend developer,” an excited Lustrino told us. “There’s this environment where everyone is communicating with one another and looking out for each other.”
“The idea from this stemmed from an overwhelming need from my friends and especially with my family with personal finance and advice,” said Project Finance Co-Founder and CEO Colby Ross. “The financial services industry focuses on selling their products, and it’s sort of up to you to become their financial expert. So, they read blogs, speak with friends, and compile all of this data and figure out what it means to you.”
Project Finance is a web-based application that helps its users out with personal finances, including how to save or how much they can spend a month on individual bills. How it works is a person will log on with the (validated) banking credentials, and it will pull information from those sources. After taking an inside look at your accounts, the app will be able to predict the future of your balances based on what you are spending now. For example, if you are paying $300 on student loans per month and start changing that to spending $350 on them, Project Finance will show how much that will change your monthly spending across your account.
Project Finance is part of the Fall 2017 cohort, and after being in the Center for six months, he told us he’s seen his company “change and improve.”
“That can be attributed to being here every day,” he said with a chuckle. “Everyone here is in the same position as you, in the sense they are trying to figure out their product-market fit. It’s a collaborative environment, but it’s the perfect type of collaboration. Everyone is going through the same stuff and you’re able to lean on each other.”
Coalesce.ai fits right into the accelerator’s Advanced Technology category. Their platform uses AI and machine learning to help large financial institutions like asset managers, banks and insurance companies, automate tedious workflows. Some of the jobs the platform has been able to help enterprises include filtering customer emails and processing investment statements.
“One of our customers receives 6,000 monthly emails with attached PDF documents,” said Coalesce.ai Founder and CEO Greg Woolf. “Coalesce automates the data extraction from those files so that employees can focus on more meaningful tasks.”
The startup’s time in the accelerator had led to a successful pivot: before using AI for operational efficiencies, Coalesce.ai was trying to use it for investment research. However, it was the connections Woolf and his team made at the center that inspired them to move in this now-successful direction.
“Being part of this center and this ecosystem has been transformational for our company,” said Woolf. “I can’t tell you how many times we’ve learned about upcoming networking events in the area through the center, and being able to connect with people in the heart of Boston’s financial center has been incredibly beneficial.”
Coalesce.ai was recently asked to be a tenured startup with the accelerator, as they will be in attendance in the accelerator’s new coworking space.
FinTech in the Hub
When most people think of the Boston tech scene and what its dominant tech sectors are, it’s almost always either digital health, cybersecurity, or hardware. However, despite having an abundance of FinTech startups, while also being the headquarters for several financial services, this sector is still expanding.
“People are more familiar with New York City and San Francisco and their financial sectors. New York has Wall Street, and San Francisco has a lot of Silicon Valley investors and tech giants,” said Roussos. “However, we are, slowly but surely, growing in relevance. The velocity of it is incredible. It almost feels like there is a new player doing something every quarter. We’re solving hard problems, which I believe puts us in a good position as we look to the future.”
Since Roussos joined the accelerator in 2016, he has been responsible for organizing the events hosted by the Center. One of those events includes collaborating with FinTech Sandbox to create Boston FinTech Week. The week-long series of events across Beantown helps shine a light on not only the accelerator, but on Boston’s FinTech sector itself.
It all goes back to Roussos’ “rising tide” analogy; as the Center grows in prominence, the Boston FinTech ecosystem does as well. For now, it appears that the Center is looking to keep its focus squarely on this specific industry. From the Managing Director’s point of view, it’s only a matter of time before it indeed takes off as one of BostonTech’s dominant scenes.
“In the last five years, what the city has been able to do is remarkable when we focus and engage, and I think the same thing is going to happen with FinTech and it’s going to be explosive,” he said. “I think we’ve got to be prepared for a wild, but fun, ride ahead of us.”
Images courtesy of DCU FinTech Innovation Center