Why this St. Louis fintech startup plans to grow even faster during Covid-19
May 22, 2020
Few St. Louis startups have grown at the pace of fintech firm Neocova.
In April 2019, the company’s staff consisted of less than 10 employees. Today, its headcount is pushing 50. But will the Covid-19 pandemic slow Neocova down?
Don’t bet on it.
“While the pandemic has slowed down a large number of organizations, that is not true with us. We are moving faster and growing more aggressively now than we were two to three months ago,” said co-founder and CEO Sultan Meghji.
Founded in 2016, Neocova initially operated quietly before emerging publicly last year. The startup — which sees itself as a competitor to fintech giants like FIS, Fiserv and Jack Henry & Associates — provides artificial intelligence, analytics and other cloud-based systems to banks and credit unions.
Banks use its software to manage functions such as cybersecurity and fraud detection. Washington-based Coastal Community Bank has tapped the startup for its compliance reporting and monitoring technology.
Banks aren’t just the startup’s customers. They are also its investors. Neocova’s $9.5 million Series A financing, closed in January, included six community banks as investors. And amid Covid-19, the company sees additional opportunity to lure in more clients as banks seek out technology and processes to help them process countless loan applications due to the pandemic’s economic fallout.
“This pressure on the market actually increases the number of inbound (applications) we have. I would say our inbound number has, roughly speaking, doubled in the last three months,” he said.
A focus on ‘main street’
Prior to launching their company, the co-founders of Neocova revealed a problem that was negatively impacting “main street” and small town America.
“When we diagnosed what was really going on, we discovered that community banks, which are the lifeblood of financial activity in most of the cities in the Midwest, were struggling,” Meghji said.
They found three key symptoms behind their diagnosis: Banks were working with outdated technology, bank vendor practices, such as seven-year contracts and hefty fees, were unfavorable and untraditional financial entities, such as SoFi and Venmo, were out-innovating banks.
Key to their company’s buildout was consulting with bankers and industry regulators, an edge that Meghji said has allowed it to accelerate past similar startups.
“It was an apples-to-oranges kind of challenge. They would build an apple, but the market wanted an orange. We went the other way. We went to the bankers and said: What do you want? And then built that,” he said.
Neocova has a C-suite built around longtime financial industry veterans: former Missouri Division of Finance Commissioner Lee Keith is its president of banking services; Peter Longo, former chief operating officer of Florida-based Surety Bank, is senior vice president of banking solutions; Julie Stackhouse, the former executive vice president of the Federal Reserve Bank of St. Louis, has joined the startup’s board.
“Certainly, we got a level of comfort when we talked to Sultan and the Neocova team and we could see that, given the talent they recruited, they have a pretty deep understanding of how banks operate and the challenges we face because of lot of them have lived it in some form in their prior roles. That absolutely gave us a level of confidence,” said John Gavigan, executive vice president and chief operating officer at Cincinnati-based First Financial Bank, one of Neocova’s investors.
Blueprint for growth
The growth mode Neocova finds itself navigating today wasn’t originally planned.
“There has been a huge pull from the market to us. We’re so far beyond where I expected us to be in terms of commercial activity than I planned. We ended leaving stealth mode last fall, far ahead of schedule,” said Meghji.
As its ramps up operations to meet demand, Neocova is placing focus on further expanding its team and products. It has 20 open jobs, with positions available in product development, cybersecurity and marketing. Additionally, in 2020, the startup plans to launch new products and intends to make at least one acquisition.
Longterm, Meghji said his ambition is for Neocova to remain an independent firm. The company has already turned down multiple acquisition offers, he said.
“We think there is no value in this company being acquired by one of the existing players. They will just take our technology and put it on the shelf and continue to do business as usual. That’s not what we’re interested in,” the CEO said.
Originally Posted to: St. Louis Business Journal