Business leaders have teamed up with the Baker administration to launch a partnership aimed at ensuring Massachusetts is a global leader for financial-tech startups.
The initiative that’s being dubbed the “Mass. Fintech Hub” has been in the works for more than a year, as civic leaders home in on another big sector to foster in Massachusetts, following life sciences and digital health.
The “Hub” is being launched by a panel called the Massachusetts Fintech Working Group — an assemblage of financial companies, VC firms, and universities led by Mike Fanning, head of MassMutualU.S., and Mike Kennealy, Governor Charlie Baker’s economic development secretary. A 2020 report by Ernst & Young commissioned by the working group showed that Massachusetts firms make up 9 percent of all fintech startups in the country. The bulk of fintech venture funding in Massachusetts, according to the report, has gone to either insurance startups or payment firms.
Some prominent local fintech businesses that are attracting attention from investors lately include payments firm Flywire, which raised $250 million in an initial public offering last week; cryptocurrency firm Circle, which announced last week that it had raised $440 million in new funding; and restaurant software provider Toast, which is rumored to be preparing for an IPO.
Among other things, this new Hub will have a dedicated website and will host career fairs and educational boot camps for startups, and provide direct access to major financial companies and potential investors. Fanning said he hopes to develop a scoring system for fintech entrepreneurs to help showcase the ones that would be most eligible to take advantage of connecting with the financial sector’s major players. The startups could become members for free, he said, while the big financial companies and venture-capital investors would pay to support the Hub.
“We have all of the elements, but nobody had the recipe of how to put them together,” Fanning said. “You’ve got a set of incumbents that need the help and want the help from these innovators and entrepreneurs [and] you’ve got a state government that wants to create an ecosystem.”
Along those lines, the quasi-public Massachusetts Technology Collaborative has contributed three grants to the cause: $88,000 to pay for the E&Y report, $75,000 to the local nonprofit FinTech Sandbox for a promotional campaign, and another $50,000 to the FinTech Sandbox to provide staff support for the new Hub. (The FinTech Sandbox is perhaps best known in Boston for its annual Boston FinTech Week series of events.) Caliber Corporate Advisers, a financial services marketing firm with offices in New York and Austin, has been hired to promote the effort.
The state government is not poised to devote hundreds of millions of dollars to the effort, like it did to stoke the biotech cluster over the past decade or so. But Kennealy said fintech startups generally need far less capital to get going than their counterparts in biotech.
“I think we have some pretty natural competitive advantages in fintech, given our legacy in financial services,” Kennealy said.
The effort could potentially build on work that the Massachusetts Competitive Partnership and MassChallenge started in 2018, called MassChallenge FinTech, to help foster a fintech startup culture in Boston. Both the Mass. Competitive Partnership, a group of high-powered CEOs, and MassChallenge, a startup accelerator based in the Seaport, are part of the broader fintech working group.
The new Hub would not have a dedicated physical space, at least not at the outset. The FinTech Sandbox will provide support, as will MassMutual and other major financial service companies in the working group — a list that includes Fidelity Investments, Citizens Bank, John Hancock, and Putnam Investments. (Several of those companies, including MassMutual, are also members of the Mass. Competitive Partnership.)
Big employers such as MassMutual, a Springfield-based insurer with major operations in Boston, benefit in part by gaining access to creative ideas and potential hires.
“There’s a huge talent play here,” Fanning said. “We view this as a way to find great people.”