The Rise Of Fintech Families

Friday the 13th reading!

This post first appeared in my Forbes column here.

With Dall-E: An image of currency bills from around the world at a family reunion

In the world of startups, we often hear about startup mafias like the "PayPal Mafia" - the group of PayPal alumni who went on to found and lead some of the most influential companies of our time – think Elon Musk, Reid Hoffman, Peter Thiel, Max Levchin and more. Arguably, Silicon Valley was created as a result of another mafia: the “Fairchildren” – the group of founders that came out of Fairchild Semiconductor. According to the Computer History Museum, “Although the firm’s market valuation never exceeded $2.5 billion, its surviving combined progeny have been estimated to be worth over $2 trillion.”

In my book Out-Innovate (HBR), I wrote about the rise of a few emerging market mafias, coming out of first-generation leaders like Mercado Libre in Latin America and Aramex in the Middle East. A recent study conducted by Gilgamesh ventures and the Wharton School of Business set out to expand this inquiry, specifically targeted in fintech. The results are fascinating, revealing what they call "Fintech Families" - a generation of fintech powerhouses that are powering global entrepreneurship.

The Fintech Families: How Top Companies Are Shaping The Future Of Financial Technology

The research identified 15 fintech companies, dubbed "Fintech Families," that have produced an outsized number of founders. These companies, all launched after 2000 and with revenues exceeding $250 million, have collectively spawned nearly 3,000 founders worldwide.

The list of Fintech Families includes well-known names like Square, Stripe, and Robinhood, as well as Latin American giants like Mercado Libre and Nubank. But it's not just the quantity of founders that's impressive - it's the quality and impact of the companies they're building.

The DNA of Fintech Family Founders

To give you a sense of the types of companies getting created by Fintech Family Alumni, see below.

So, who are these founders emerging from the Fintech Families?

Product and engineering roles were the core source of talent. A full 50% of the founders came with these backgrounds. They were not alone. Strategy and business operations roles were also well represented.

These Family members were not staying in the same field. The majority of alumni from these companies have gone on to found businesses in other sectors. This speaks to the transferable nature of the skills and mindset developed at leading technology firms.

How Fintech Families Are Created

So, what creates a Fintech Family? While there's no simple formula, the research suggests that strong brands play a crucial role. Companies that can attract top talent and build nationally or internationally recognized brands seem to be the most fertile ground for future founders. I suspect looking at the data, sufficient liquidity events help too – companies that have meaningful secondary tenders (e.g. Stripe) or IPOs (Mercado Libre) give the next generation the financial freedom to experiment – and their peers the ability to angel invest. I would be remiss without mentioning Endeavor’s work in ecosystem building, and their own research on Multipliers, many of which are represented in this research.

Those that create mafias, do so in spades. Like all things in startups, power laws matter. VC fund returns are dominated by outlier VC funds, driven by underlying outlier startups. And similarly, certain companies are outliers in creating startup mafias. Not all are created equal and choose carefully.

What was equally surprising to me was the exclusion of certain companies from the list. For instance, giants like Shopify or UiPath, giants from Canada or Romania, were not high on the list.

Why this matters

This research underscores the importance for investors and entrepreneurs to be actively building relationships with key talent at these startup factories - early. Many of today's top founders cut their teeth at other successful fintech startups before.

Fintech Families alumni haven’t just succeeded in raising capital, they also seem to be reasonably resilient. Despite the economic headwinds of recent years, 2023 saw the highest number of new fintech companies founded by alumni of these firms.

For aspiring founders, the message is even clearer: joining a leading technology company can provide invaluable experience, networks, and inspiration for your future ventures. For one, they provide domain expertise. Research suggests the most successful founders are older, more experienced and solve problems they know deeply (with exceptions of course).

What excites me about the research is Fintech Families are not just creating successful companies; they're creating ecosystems of innovation that will shape the future of finance. And we’re still early days: many of the companies studied are relatively young, and the median time to IPO for startups is 7-10 years. This means that the real wave of innovation from these alumni networks may still be ahead of us.

Onwards.