Business

Fidelity, Amazon, others backing FinTech startup program

Fidelity Investments, Thomson Reuters, and Amazon.com are jointly launching a business startup program in the Boston area later this year that will support new companies targeting the financial services industry.

The new program is dubbed the Fintech Sandbox, but it won’t be a traditional business accelerator such as Techstars or Y Combinator. Instead of providing seed funding, the Fintech Sandbox will help fledgling fintech ventures get access to data for free or at discounted rates.

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“Fintech entrepreneurs have a unique problem, which is the high cost of data to help them build applications,” said David Jegen, managing director of Devonshire Investors, the private investment arm of the Johnson family, which controls Fidelity. “They raise $2 million of venture capital funding, and then spend $500,000 of it buying market data from Bloomberg or Thomson Reuters. Or they show up to customers, who say, ‘Nice app, but it hasn’t been tested on robust data sets.’ We think that is a problem we can help solve.”

The program’s other backers include venture capital firm .406 Ventures, and startup BuysideFX. Its supervisor is Rocky Weitz, the former chief executive and cofounder of Boston startup CargoMetrics.

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The Sandbox will also be a virtual program — meaning its members will not have to move in together and share office space. But it will have a home base in Boston or Cambridge, Jegen said.

“We want there to be some physical location where entrepreneurs can show up, hang out, and work with each other, and with mentors and customers who are interested in what they’re doing,” Jegen said.

The Sandbox will help selected startups access a wide selection of financial information and sample data sets, such as commodity prices or anonymized retail transactions, that will be useful as they build and demonstrate their products. Amazon’s Web Services division will supply data processing and storage services.

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Incorporated as a nonprofit, the Sandbox will not provide financing for its startups, but it will also not require the companies to hand over an equity ownership stake.

The program, said Sean Belka, a senior vice president at Fidelity, “is designed to be purposefully complementary to what’s happening in the startup community.”

That means that companies at other accelerator programs, or working out of a venture capital firm or university startup space, can also play in the Sandbox. And while there will be networking and educational events held in Boston, and perhaps some shared office space that entrepreneurs can use as needed, the Sandbox is intended to be a global program.

“Inherently, this is a virtual offering,’ Jegen explained “London-based startups will have access to it, too.”

He said the backers expect to have three startups lined up once they’ve finished testing the computer resources that will be available to companies; more startups will probably be invited to apply by the end of 2014. A standard stint in the Sandbox will be about six months, Jegen added.

Local investors who are active in backing fintech startups say the Sandbox could fill a void.

“I’d be very pleased to see Boston do more with fintech. I think we have a massive skill base for it here in town,” said Christopher Mirabile of Launchpad Venture Group.

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner and on betaboston.com.
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