Where Big 4 Are Helpful and Where They Aren’t
Several startups recently complained to me how frustrated they are with Big 4 advisors and large law firms.
“For all they money we are paying them, they came to the conclusion that our services should be subject to VAT, and then only by accident we discovered that they shouldn’t”
“They took two months to prepare an opinion that I should account for clients’ cryptocurrencies on our balance sheet and later on our supervisor from the central bank clearly told us not to do it”
“They are so expensive, and take such a long time to review everything, but in reality, all the ideas and concepts that go into the final document are generated in house, and the consultants just correct a few typos”
Sounds familiar?
I recently had dinner with one of the partners of Big4. We compared notes and clearly saw why what I do is in no way a competition to what they do.
Where it comes to compliance, startups and new business models in FinTech often go through a few stages:In my personal opinion, Big4s can be useful at the first and the last stages and almost unnecessary in the middle, and I personally work with projects in the building phase only. Let me explain.
- brainstorming and conceptualizing or “we see this opportunity and market gap, how to we close it and what can we sell and to whom”;
- building beta or “we know what we want to sell and we even have a few customers or prototype, now we need to build the team, product, market, raise more funds”
- validating – scaling, applying for licenses, entering into high profile partnerships.
During “brainstorming”, startups search for ideas, patterns, examples of who is doing what and what is possible. They rarely pay during this stage, and Big4s are big enough to absorb these costs. What Big4s do is they ask a lot of leading questions and share some commonly known concepts. They don’t do anything innovative and they definitely don’t generate any new ideas, they just help entrepreneurs think.I mentor a few startups at their early stages as a part of my “community service” with a few startup accelerators, but it wouldn’t be a valid paid service for me – because brainstorming is time consuming and it’s impossible to bring fast results or tangible success at this stage.
Later on, there is a building phase and this is where startups, in my opinion, should avoid any large consultancy firms, if they can help it. One of the projects I’m involved now, took about a year to mature from brainstorming to building. They probably talked to all known FinTech lawyers and whale consultants on this continent during the last 12 months and now they have the funds, the core team and a clear idea of what they are offering and to whom. It’s time to build the product, design processes, select tools, apply for licenses, secure partnerships. All of that requires actionable and practical interpretations of the laws and regulations. They have to answer questions, such as:Big consultants are helpless with that (even if they say they are not J ), simply because they don’t know your business and often don’t understand the details well enough. And when they don’t understand something, they err on the side of caution, ask unnecessary questions and you definitely get a feeling that you work harder than them. I’m generalizing and oversimplifying, just so you get the idea.
- How do you actually onboard your customers
- What questions you will ask them
- What will be the average transaction size,
- How will you manage fraud
- Who will have access to which set of data
- How many legal entities do you need
- Which positions can be combined by one person…
After building is over, you need a validation – you will need to have successfully complete various audits, you need legal opinions, tax rulings and all kinds of other forms of assurances. And obviously, this is what large consultants are for.
What’s your experience?
3 phases of startups compliance journey and how Big4 fits in there: https://competitivecompliance.co/where-big-4-are-…where-they-arent/
