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FinTech and the corporate finance profession

Corporate finance can be broken down in two different areas: deal origination and deal execution.

Deal origination (pitching investment ideas, networking, providing actionable market intelligence) is increasingly taken over by data providers, using SaaS business models, especially around early stage companies and reporting on past events. What such SaaS models are not capturing yet, are deeper insights and forward-looking information on larger companies.

Deal execution is where the fees are made: creating marketing materials (IM or investment deck), finding potential investors, soliciting offers, managing the due diligence process, and deal negotiation. Part of the reason why deal fees are often so high is that bankers need to be compensated for (a) time spent on deal origination and (b) executing deals that do not result in a completed transaction. FinTech is now making it possible to significantly reduce these costs (a) and (b). And of course, it will no longer be needed to spend $100,000 on an online dataroom.

Then, what is left of corporate finance, after it’s been stripped off the costly and least efficient processes, are the more value-added human involvement such as: creating marketing documentation, tactical advice, negotiation. In summary, then, corporate finance seems ideally suited to be disrupted by FinTech. Customers stand to benefit through lower costs, more control and higher service levels. This disruption is likely to take place with early growth stage companies first, and mid-market companies second.