Crisis situations hit most FinTech startups a few times a year. By crisis, I mean some sudden changes in external circumstances or adverse events where founders and the management team are unsure if and how their business is going to survive.

Some of the (most common) examples:

• Counterparty failure or loss of a key partner (think Wavecrest or Wirecard)
• Breakup or conflict within the core team when someone really important to the business leaves (and takes resources or people or customers with them or blocks important decisions until they are being paid out)
• Police or criminal investigations around your business or customers
• Risk of losing your license or permission to operate or license rejection
• Something bad or embarrassing the company or its core team did in the past is revealed and triggers an investigation and/or a public scandal
• Security breach, loss of funds, big dispute, regulatory fine, or audit discovery is about to “kill” your company’s reputation and makes the customers flee. Fixing this costs a lot of money and you have very little time.

If you work in FinTech, I can almost guarantee that one or more of these scenarios happened to you last year and something similar will happen again this year. It happens to everyone. Expect it and don’t kid yourself.

How do I know this? – Because those are the moments when I am often getting hired or at least being approached.

Why this is so common? 🤔

• Most startups depend on large partners and this creates over-reliance risk. It’s very expensive to maintain redundancies and it takes a long time to secure such partnerships, which inherently creates one single point of failure. 
• Most startups don’t have the resources or time to do everything perfectly, which is why they take shortcuts. At some point, they get caught.
• Most startups are run by brilliant but inexperienced managers who don’t know how to handle regulators, auditors, police investigations, or critical disputes. They panic, fight, blame, and let out their emotions, which makes things worse. 

Obviously, every crisis is unique, however, this is what is helpful to keep in mind:

• Counterparty failures have warning signs – be mindful if your counterparty situation worsens and then start preparing plan B. 
• If your reputation is at risk and you don’t know what to do yet but need more time, bring in someone very experienced and very credible as an interim manager (or board member) and make them vouch for you vis-a-vis regulators and other stakeholders.
• Regulatory and audit troubles ALWAYS have warning signs. If you feel your approval or situation is going around circles, bring in someone more experienced to offer you a perspective. Perhaps, you are insisting on the wrong priorities and have to compromise.
• Be open and honest with your regulators about what happened. Don’t cover things up. Regulators may be more understanding and flexible than you think.
• S**t happens all the time, but in 90%+ of all cases that I have seen, companies survive and move on. There is almost always a way forward.

Is there a crisis at your startup you don’t know how to handle? Can I help? 🤓

Prefer to listen to this content instead of reading? Then tune in to this podcast episode of Compliance That Makes Sense.🎧