How to bootstrap a fintech startup in an industry lacking structured corporate innovation

When you think of fintech, solutions are often geared toward banks.

By contrast, my D.C.-based startup, CUCollaborate, creates products focused solely on credit unions. I love credit unions and I love working to help them grow. But I learned earlier in my career that the industry can be slow to innovate — mainly, I think, due to the lack of people and companies focused on developing new technologies for credit unions.

For those who don’t know, which is too many of you, credit unions are not-for-profit financial institutions owned by the consumers who use them. They have been operating in the United States for over 100 years and offer better rates than their competitors. However, you must be eligible to join a credit union; the rules regarding who can join a credit union are called the field of membership. Credit unions’ field of membership creates a lot of problems for credit unions, and many consumers aren’t aware they’re eligible to join a credit union.

This is the problem that I founded CUCollaborate to solve: While there are fintech startups focused on all financial institutions, very few hone in on just credit unions and even less focus on problems that are unique to them, like field of membership.

There were a few challenges I ran into when bootstrapping my company. The most straightforward was figuring out how to make something that someone would pay for that took little to no upfront capital to make. I also ran into issues of credibility. At first, it was a company of one being run out of my apartment. Sometimes it was hard to get substantial companies (including Fortune 500 companies) to take me seriously under those kinds of circumstances. Finally, I believe that raising capital provides a degree of external validation that can be reassuring. Growing my company without that external validation meant that I needed to maintain my determination and optimism for roughly four years without what I considered significant external validation.

The two most significant factors for not fundraising like most traditional fintech startups are that I consider myself bad at raising money, and I know that I want to maintain control of my company as it grows. I also have no intention of selling my company, which isn’t something that most investors want to hear. Bootstrapping has allowed me to run my company in a way that aligns with both my mission as well as our customers’. It has also provided me with greater freedom to test different things out and find where we fit within the market without feeling tied to pursuing a specific line of business centered around our fundraising.

Fintech is seeing a lot of growth, reaching a total market of $111.8 billion in 2018, and is drawing significant interest from credit unions. However, I see fintech startups that are looking to compete with credit unions and banks for customer relationships as a threat to our clients. My goal is to equip credit unions with the resources to beat both banks and other fintechs/neobanks. I think that credit unions are very eager to embrace innovation; however, many of them do not have the resources to innovate themselves, and I do not see many other innovative companies focused on addressing the unique pain points felt exclusively by credit unions.

A significant bottleneck to innovation in the industry is that credit unions need to attract talent from outside of their industry. The industry is unique in that most of its talent is brought up through the industry from a very young age. It is atypical to see someone who works in an innovative, customer-centric industry come to work in the credit union industry.

Corporate innovation has been something that banks have started to adopt, but that credit unions often lack the resources to do. There are a few credit unions that have started to take a more innovative approach, such as VyStar Credit Union in Florida, which launched a $10 million fund for fintech startups and Digital Federal Credit Union, which started a fintech incubator. I think that if there were more corporate innovation centers focused on credit union technologies, more technology would emerge specifically around that industry.

I often think to myself, “How has no one come up with this idea before?” There are products — like our Credit Union Match website, which allows anyone to discover what credit unions they are eligible for — that are so simple, yet many credit unions have not created this technology. There is ample opportunity for innovation and growth in the credit union industry, and a more explicit focus on corporate innovation would bring a new class of fintech products to the market.

Credit unions are eager to adopt new technologies, and I think a portion of our success is thanks to the flexibility bootstrapping CUCollaborate has given us to focus on building products specifically for our credit union clients.