So-called FinTech Unicorns, startup companies valued at more than $1 billion, earned that moniker because they were rare. However, that’s no longer the case. As of September 12, 2016, there were more than 175 Unicorns worldwide, worth a staggering $625 billion.

At first glance, this might be interpreted positively – the fact that there are so many FinTech firms flying high must mean that their future is rosy, right? Unfortunately, no. It seems counterintuitive that being valued highly can spell trouble, but that’s exactly the situation many FinTech Unicorns now find themselves in.

Too Expensive for Many Investors

When a startup firm’s valuation rises to above $1 billion, it can become too expensive for investors.

Not only does the pool of possible buyers shrinks, those possible buyers question whether they are actually getting value for their investment.

While overall FinTech funding in 2016 is on track to surpass 2015 levels, venture capital funding for FinTech startup firms fell 49 percent in Q2 2016, according to research firm CB Insights.

What should FinTech Unicorns to do?

Hope to be purchased by a tech giant

Some FinTech Unicorns pin their hopes for their future on being purchased by tech giants in the finance space. While some will enjoy this fate, the majority will not be so lucky and may end up having to be sold off at a much lower value.

There is always the chance that a company outside the finance space will purchase FinTech Unicorns, however, because of the regulatory compliance challenges that come with operating in the financial services world, potential buyers may not be willing to take on added risk.

Go public

If a firm has a scalable business model, it may go public, although the FinTech Unicorns that have gone public in the past year have had mixed success.

Justify its existence to investors

If its business model isn’t scalable enough to take it public, the firm will need to justify its existence through revenue. Many Unicorns are frankly not prepared to do this well, and are in danger of becoming “Unicorpses.”

How Unicorns can Avoid Becoming Unicorpses

FinTech Unicorns that find themselves in the position of needing to demonstrate their value through revenue would do well to evaluate how others have avoided becoming Unicorpses. Critical success factors include:

1. Don’t skip the research step. Firms need to keep a close eye on both the financial services regulatory environment radar and on tech industry developments. Just as important, startups need to have a clear picture of what the industry actually wants. FinTech firms that skipped the research step and jumped right into development risk failure because their vision of what the financial services industry needs isn’t accurate.
2. Understand that products won’t sell themselves. Many FinTech firms fail for an astonishing reason: they don’t devote resources to sales and marketing their products. Firms may be overconfident about how their product will be perceived. Another mistake is failing to realize that financial services firms don’t move quickly to implement new technology, as a general rule. FinTech firms that are aware of how the financial services industry operates will have more staying power.
3. Have an up-to-date web presence. According to a survey of 1,500 business leaders by Google and CEB Marketing Leadership Council, business buyers rely on digital channels to learn about prospective vendors and service providers for nearly the first two-thirds of the purchase process, before ever involving a salesperson. FinTech firms that make the mistake of not devoting resources to its website and social media channels risk being overlooked by both financial services firms and by would-be investors.
4. Focus on regulatory tech. Given the regulatory compliance environment in which financial services firms operate, FinTech firms that can automate tasks and reduce fraud may be perceived as more valuable.
5. Have an app for that. FinTech firms are overwhelmingly making their service offerings available as smartphone apps, and financial services firms and their customers expect it. Unicorns who don’t make this a focus area are likely to be deemed less attractive.
6. Offer white-labeled solutions. Financial services firms want to be able to apply their own branding to the technology tools they deploy for client and employee use. Successful FinTech firms need to recognize this and meet the demand.
7. Commit to diversity in leadership. As women continue to assume financial management roles for their households and invest in greater numbers, financial services firms are actively looking for ways to reach them. FinTech firms that can demonstrate their commitment to empowering women and minorities at the highest levels of the organization will likely be more attractive to firms.
8. Commit to social impact. As social and environmental awareness continues to grow, particularly with Millennials, FinTech firms that can demonstrate their commitment to more than just turning a profit may fare better with clients and investors alike.
9. Meet cyber security requirements. Financial firms are under enormous regulatory scrutiny and must be ever-vigilant about protecting their clients’ information. FinTech firms that can demonstrate their commitment to information security measures will be perceived as adding more value.

Of course, there is no guarantee that a FinTech Unicorn will survive, but keeping a finger on the pulse of financial services industry trends and regulatory requirements, and ensuring products and service offerings are designed with those trends and requirements in mind, can help Unicorns avoid becoming Unicorpses.