Barclays Techstars’ Jon Zanoff on Startups, Banks, and Fintech’s Future
Jon Zanoff is ready for a new nickname.
Dubbed “The Mayor of Fintech,” Zanoff, the newly appointed managing director of the Barclays Techstars accelerator in New York, has certainly been entrenched in the financial technology industry long enough to deserve the title. For the past five years, he’s presided over Empire Startups, a New York-based network for aspiring fintech phenoms to flesh out their fledging ideas. Before that, he dabbled in an e-commerce app and was in the “belly of the beast” as a trader (as he puts it).
But with a new working title—he officially assumed his new role with Techstars April 24—comes a new sobriquet.
“‘The ghost of fintech future’—that’s the title that I’d like to see,” he says. “I truly believe that the accelerator model is the future of how we’ll see technology innovation. This blending of access to capital, subject matter experts, but also support in customer acquisition and in distribution, is a pretty powerful recipe.”
We caught up with Zanoff to learn more about his new Techstars role, Empire Startups, and what to expect in the world of fintech in 2017. The following interview has been edited for clarity and length.
Xconomy: What will your new role with Techstars look like?
Jon Zanoff: I’ll be spending the lion’s share of my time, whether it be in-person or virtually, combing the world for top fintech entrepreneurs to join the program. My job is to turn over every stone to find tremendous fintech entrepreneurs, whether it be blockchain, lending, payments, product-market fit or otherwise.
X: Does this change what you’re doing with Empire Startups?
JZ: With Empire Startups I’ll continue on as an advisor, but I’ll be transitioning completely to Techstars.
X: What is the timeline for crafting this year’s class of Barclays Techstars in NYC?
JZ: Applications close July 2, but there’s a review process. Techstars typically accepts about 1 percent of applications. On average, that means we’re looking at 1,000 applications to find 10 diamonds in the rough. The actual class starts Oct. 16, so much of the summer will be reviewing and doing due diligence on these companies. The program actually runs from Oct. 16 until a demo day on Jan. 30… My role transitions from recruiting these great companies to mentoring them.
X: Any plans long-term? Or after the class wraps up next year?
JZ: Something that Empire Startups absolutely doesn’t do is invest in companies, so it was sort of a natural transition to the Techstars organization that helps companies in many, many ways. I see my future as continuing to support innovation however I can. Whether that be more on the community side or on the investment side—to be determined.
X: I don’t know how much you agree with the whole fintech vs. banks concept, but can you provide any sort of update on the fitness of that tug-of-war?
JZ: Candidly, I think that’s just media buzz. I don’t subscribe to this idea that fintechs are truly disrupting or putting the incumbents out of business. And more recently, as the articles have come out saying, “disruption has turned to partnering,” I think that was in response to really just media having fun. But the reality is just the opposite.
Banks are always hungry to innovate, and for a long time in order to move fast they’ve established small skunkworks teams able to work on side projects without being beholden to the roadmap and client demands. The accelerator model is simply the modern version of traditional skunkworks. They take very small, elite teams, surround them with every resource they need, and let them build technology in a sandbox.
I think fintech is as strong as ever. I think banks’ desire to embrace the fintech community is as strong as ever. That’s not to say they’re still not learning the best ways to engage, whether they—as Barclays has done—partner with Techstars, whether they decide to take an acquisition strategy, or whether they decide to do it themselves.
X: What about the supposed lack of trust customers have in banks? Do you think that’s more media hype? Or is that a real advantage for fintech startups?
JZ: There’s sensitivity to the fees and commissions that banks are charging, and there’s consumer sentiment that they tend to be very profitable animals. I see actually a lot of the other side, which is in order to adopt nascent fintech, there’s quite a bit of establishing trust that young companies need to do. If you’re going to transfer money into a seed-stage robo-advisor, a lot of your positioning—not just user experience but also your marketing messages—needs to establish trust in order to acquire those customers. I think that’s a bit of a lesson that fintechs can learn from the banks.
So, yes, no one trusts their banker and you see those sort of punchy surveys, but at the same time people aren’t super keen to transfer their checking account to the savviest of young startups without first establishing trust.
X: Are there locations outside of New York where you’re bullish on fintech going forward?
JZ: I am admittedly wildly biased to New York where the density of entrepreneurs and incumbents is a tremendous advantage, as is the general culture of building something out of nothing. That said, around the world there’s tremendous momentum for fintech, whether it be Singapore, Hong Kong, the U.K., Germany, or Australia.
In almost every other ecosystem you have closer ties between regulators and innovators. New York is a three-hour train ride from DC, yet you’d be surprised at how few conversations really happen. Contrast that with the regulatory sandbox in the U.K.—I should also throw Toronto into those mixes. But fostering an environment where it’s an open dialogue between regulators and innovators is a tremendous asset that a number of areas around the world have.
Outside of regulatory, I think there’s a lot of interesting technology serving underbanked and pre-prime in South America as well as payment technologies in [Central and] South America.
And then I mentioned Toronto. Toronto’s been this sort of quiet fintech capital for decades. Depending on who you speak with, and this is contentious, many think it’s the birthplace of A.I. And so long as you have the brightest engineers coming out of Waterloo and the banks all on one street in the same city, it’s a place that I would plan to be digging into to uncover the next great fintech company.
X: What do you see happening with the regulatory environment related to fintech in 2017?
JZ: With the new administration, we’re in a “wait and see” if things are going to change. The mild concern with deregulation is that if we enter into a period of prolonged success for our financial institutions, the risk is they become increasingly myopic. If you’re making money, if bonuses are sky-high, are you really motivated to say, “Who are our competitors? What potential fintech companies could be eroding our value proposition? Let’s go hunt them out and try to partner with them and learn from them.” That’s an aspect of deregulation that I think concerns me, but that’s also very much a “wait and see.”
X: Any other trends you’re seeing in fintech at the moment?
JZ: The robo-advisor space has been well-covered and is arguably frothy and well-served. That said, I still think we’re just scratching the surface. I know people kind of roll their eyes when they hear the term robo-advisor these days in some circles, or at least in my circles, but I still think there’s a lot of opportunity there.
I think another general theme in fintech is around customer service. This is a lesson that the incumbents know very well and it ties into customer trust. It’s the importance of customer service. Millennials push for a mobile-first experience, but if you boil that down, what they really want is an immediacy of accurate answers and an immediacy of solving their problems. Fintech companies like Lemonade that have sort of perfectly blended an A.I. chat experience with human customer service to provide some of the quickest insurance applications and claim resolutions out there, is just a tremendous theme. Any fintech company that focuses on service first, I think, is going to be successful.