Banks And Startups Need To Partner For Growth, But Who Can Stop The Risks Involved?

Catalyst Fund, an accelerator for Tech inclusive innovators, offering accessible, affordable and appropriate solutions across a range of sectors and key markets in Africa, South Asia and Latin America, has announced its partnership with Five Nigerian Banks to stimulate collaborations between corporations and startups in emerging business markets.

Fidelity Bank, Access Bank, Sterling Bank, Ecobank and the VFD Group (an investment group operating the digital, mobile VBank) are pioneer members of this initiative collectively called “The Circle of Corporate Investors”. Its aim is to help startups and corporate establishments “better discover the technical and commercial synergies while sharing learnings and insights with the wider industry” as Maelis Carraro, Managing Director of Catalyst Fund puts it.

This new initiative is not just about financial institutions and startups. The Circle of Corporate Investors was created by Catalyst Fund to fulfil its aim of bringing innovators in different industries – Telecommunications, FMCGs, Logistic services and more, to share the same goal it has.

Members of this initiative receive benefits such as: Landscaping of the industry by global technology standard, customized toolkits to strengthen and streamline success for the Startup’s partnership processes, access to de-risked partners from Catalyst Fund’s portfolio, access to roundtable discussions with knowledge-sharing from leading global innovators, innovative strategy development, and many more.

What about the risks? Has the Pros and Cons for both sides been evaluated?

Partnerships do not come without some form of risks for both ends.

For a startup, there is the possibility of losing focus and building with the corporate partner, and then eventually losing themselves, their identity and the belief that they can stand on their own. A Harvard Business Review Article explains that “disparities in size, structure and power can make it difficult for startups to connect with the right nodes within a Large Corporation”.

Moreover, startups are also experimental set-ups, and their losses could cost a Corporate their Public image and trust.

For the Corporation, they may become too engaged in pursing their interests that they forget to integrate the goals that the startup had set out to pursue by sealing the partnership in the first place. World Economic Forum Whitepaper further notes: “Many startups fail, so the investment risk for Corporates is high, compared to their usual investment projects”.

Catalyst Fund did not just invent The Circle of Corporate Investors without considering how to minimize risk for both partners. Managing Director of the Catalyst Fund Maelis Carraro again explains that: “The goal of the Circle of Corporate Innovators is to actively facilitate and de-risk these partnerships, equipping both innovators and startups with the tools and expert support they need to better discover technical and commercial synergies, while sharing learnings and insights with the wider industry.”

With respect to the practicality of this partnership, earlier successes recorded provide a positive inference:

Unilever partnered with Catalyst Fund’s Portfolio company Sokowatch, to target millions of new customers in East Africa. Mobilife partnered with Standard Bank in South Africa, and they were able to process 7,000+ insurance claims. Bamba is working with BBVA to deliver bank accounts and other financial products to 8,000 workers in Mexico.

Clearly, this partnership will bring success to the respective partners involved.

Two key stakeholders from some of the partners have expressed their thoughts on this alliance:

Nvalaye Kourouma, Chief Digital Officer at Ecobank says: “At Ecobank, innovation is a growth engine and at the heart of everything we do. We are committed to building and working with the entrepreneurship ecosystem across Africa to drive this innovation. The partnership with Catalyst Fund is a major step in building a framework for a productive engagement with startups and other key stakeholders to make this a success”,

Gbenga Omolokun, Executive Director Group Risk, Compliance & Technology at VFD Group Plc. posits that: “As a proprietary investment firm with a very significant commitment to improving financial services delivery across Africa, partnering with Catalyst Fund is an opportunity to accelerate our vision of reaching the last mile with practical and empowering solutions. We are excited by the sheer possibilities that lay ahead,” said Gbenga Omolokun, Executive Director Group Risk, Compliance & Technology at VFD Group Plc.