The Money2020 show is happening this week in Las Vegas. I was there last year and it was huge. It’s even bigger this year with over 10,000 attendees. In much the same way as this event has huge scale, fintech companies must also achieve massive scale in order to be successful. It’s a go big or go home market.

The most obvious examples of this are the payments companies. Payments is a great business in the sense that once you’re in place, you just take a small cut on everything that passes over your rails. BUT, it requires huge scale in order to make money. Square is evidence of this. It had a loss of over $50M last quarter alone, despite having revenue of over $330M.

If we stay on payments for a moment, Stripe is the favourite payments engine of every developer I know. They have raised $ 290M to date and are worth $5B. I have not seen their financials, but in 3 years they have gone from a valuation of $18M on their seed round to $ 4.9B on their series D. Clearly the market expects Stripe to be the next Paypal – a massive market leader in payments.

Direct to consumer startups also require huge capital. The consumer market is massive, but hard to reach at scale unless you have a viral product. So, if you’re looking to build a B2C market leader then you will need lots of capital to build your brand. Toronto’s Wealthsimple knows this and came out of the gate swinging with a $30M Series A round. This is massive for any market, but probably the largest Series A for an internet company in Canada.

Even B2B fintech companies need scale. If you’re moving money or handling other sensitive financial data on behalf of companies, then your company and product needs to be rock solid. You will have onerous service level agreements, uptime requirements, etc. You will need a strong balance sheet in order for companies to feel comfortable buying from you. More fundamentally, you will need to become the clear standard before companies adopt you en masse. It’s a winner take all dynamic.

Sensibill here in Toronto is an example of this. They work directly with the biggest banks. So, for them to succeed they will have to pull off massive enterprise sales.

Lending is another hot fintech sector today.  Here are just a few companies in this space:

Kabbage: $ 316M

Lending Club: $ 236M (before IPO)

Fundbox: $ 107M (in it’s first two years of existence)

The point of all this is that if you have a fintech startup, you have to be thinking really big. The only way to win is to build a large, well capitalized leader. And you have to do that quickly. Fintech is super hot right now. But that also means it’s one of the most well-funded sectors out there. Many segments will be winner takes all. So the company that scales fastest will win.

Go big or go home!