András Bethlendi

While the most important financial and accounting issues of early-stage enterprises with fast growth potential (startups) are widely covered in practice-oriented literature, academic studies do not deal with this subject. In the author’s opinion, this subject should receive more attention in academic writing, as inappropriate financial management can make it more difficult for startups to raise capital at a later stage of operation and, thus, to grow further. This paper is based on a sample of financial and tax due diligences of Hungarian startups. The authors intended to present some of the issues identified and relevant also to startups operating outside Hungary. The sample shows that due to a loss making operation in the early years, this type of companies can quickly use up their equity and, therefore, they need continuous ownership (equity) financing. The sample demonstrates that debt financing is not a viable option for this group of companies, the only option for them is venture capital financing. The authors confirmed the positive relation between startups and R&D&I. In their opinion, compliance with the rules and the optimization permitted by the rules themselves is highly significant for startups to manage their high upfront losses and to attain their general aim to raise investment capital. The financial and tax due diligences at startups allowed to identify several inappropriate practices due to complicated accounting and tax laws.

The digitalization of financial services has led to the emergence of new, innovative services and providers. This paper first examines which actors are defined in the related literature as members of the Fintech ecosystem and what their roles and responsibilities are. A common element in the literature reviewed is that traditional financial institutions, startups, regulators, the investment community, and technology developers are identified as actors in Fintech ecosystems. The analysis then highlights how the large technology companies that are referred to in the literature as Big Tech (Meta (Facebook), Apple, Microsoft, Amazon, Alphabet (Google), Baidu, Alibaba, and Tencent) have become active in the financial services sector. It also examines which comparative advantages have led to the possibility for Big Tech companies to become third-party and then independent providers of financial services. As a result of their previous activities (software development, marketing, social media, online retail, and content services), they have acquired both a significant global customer base and outstanding IT development capabilities. These factors have enabled them to interact with former members of the Fintech ecosystem. They have formed partnerships with traditional financial institutions, then become their competitors, and they look to Fintech startups as acquisition targets. These factors determine Big Tech companies to become part of the Fintech ecosystem as a competitive service provider. From a practical point of view, these phenomena emphasize the need for the regulatory efforts on Big Tech companies.