SWOT and Portfolio Analysis Applied to Securitize FinTech

Introduction

There are a wide range of tools that business enterprises deploy in an attempt to assess not only their competitive position, but also their performance. Some of these tools include — but are not limited to — SWOT analysis and portfolio analysis. These tools are of great relevance to both large and small/medium enterprises, and can be applied to mature businesses as well as businesses that are just starting out. This paper concerns itself with Securitize, one of the startups in FinTech. Assuming the role of Securitize's CEO, this analysis assesses the advantages and disadvantages of each of the two approaches identified above (i.e., SWOT analysis and portfolio analysis), and considers how each approach could be applied to the company.

Company Background

Over the last few years, a number of startups have emerged in FinTech, including Securitize, Coinbase, Opendoor, Paydiant, Spur, Chima, and Ripple, among others. Having been founded in 2017, Securitize "was born out of a mission to decrease friction and create liquidity in the private sector" (Securitize, 2022). The founders of the company saw the need to ensure that limited partners had access to both liquidity and automation, and sought to deploy blockchain technology to achieve this. It is important to note that in the past, limited partners have been largely deemed illiquid. One of the stated goals of Securitize is ensuring that all of the digital assets of the world are made digital (Securitize, 2022). Some of the company's key competitors at present include Wanchain, Quantstamp, Kadena, and TokenGet. The company is based in San Francisco, CA.

SWOT Analysis: Benefits, Downsides, and Application

SWOT, as Wheelen, Hunger, Hoffman, and Bamford (2018) indicate, stands for Strengths, Weaknesses, Opportunities, and Threats. It is one of the most widely used tools in strategic management. In the case of Securitize, SWOT analysis would be instrumental in efforts to assess the competitive position of the enterprise. An assessment of this nature would enable the formulation of a viable and effective strategic plan. The identification of the various Strengths and Weaknesses will be of great relevance in evaluating the firm's internal environment, while the identification of Opportunities and Threats will be key in evaluating Securitize's external environment.

To begin with, and perhaps most importantly, SWOT analysis permits a multilevel analysis (Amason, 2011). This means that the tool does not have to be analyzed as a whole for its benefits to be realized. At Securitize, key insights about the company or the environment in which it operates could be gathered by focusing on a specific category — i.e., strength, weakness, opportunity, or threat. However, for a comprehensive view of the competitive position of Securitize, all categories would need to be used in combination.

Secondly, in comparison to other assessment tools such as portfolio analysis and financial ratio analysis, SWOT analysis is a relatively easy tool to apply. It does not require complex analysis or computations. As a result, Securitize's SWOT analysis could be undertaken by any of the executives or teams that the organization already has in place, with no need to hire an external consultant. All that would be required is knowledge of the company's current business operations and key industry trends. It should also be noted that because of this simplicity, the approach is also cost-effective, requiring no significant investment in terms of time, human resources, or money.

Third, SWOT analysis can be deployed on multiple fronts within the company. For instance, it could be applied to the entire organization or to a specific organizational unit. The versatile nature of the approach also means it could be applied to any of Securitize's key business processes with the intention of evaluating viability.

Despite these clear advantages, there are a number of shortcomings that should be recognized when deploying SWOT analysis. One such shortcoming is that there is no way of determining which elements captured within the four categories are of greatest significance. The approach does not provide clear weighting factors to more accurately guide decision-making. This makes it difficult to rank the various elements in order of significance — particularly when, due to resource constraints, the company may not be able to address all identified weaknesses and threats.

Next, SWOT analysis, as Amason (2011) points out, can be somewhat ambiguous. This is because the tool advances what could be referred to as a "one-dimensional model" that places each identified element under one of the four categories (p. 152). In the case of Securitize, each factor would have to be identified as either a strength, weakness, opportunity, or threat. The problem is that some elements may not fit firmly under a single category. For instance, the company's global footprint could be considered a strength, but it could also be a threat in terms of the high cost of operation.

Third, Amason (2011) also notes that SWOT analysis is not immune to subjective analysis, as the biases of persons participating in the exercise can be reflected in the elements selected. Moreover, Amason (2011) argues that SWOT analysis has a rather short "expiry date." External factors can change quickly, rendering a recently completed Opportunities and Threats assessment stale. For this reason, there is a risk that Securitize might end up relying on inaccurate data for decision-making.

In the case of Securitize, strengths are those factors that assist the company in achieving its mission. The following factors represent areas upon which Securitize's success can be further enhanced going forward.

i. Innovative

There is no doubt that Securitize is one of the most innovative companies in FinTech. The company has been recognized as a leading innovator in the realm of blockchain. More specifically, "in 2020, with its industry-leading primary issuance and compliance platform, Securitize was recognized by CB Insights as a top 50 global innovator leveraging the blockchain, their first-ever ranking of the most promising companies within the blockchain ecosystem" (Securitize, 2022). As a result, Securitize has the capability to boost its bottom line through the formulation and implementation of new services, ideas, and processes, staying ahead of competitors through innovation that better meets customer needs.

ii. Global Footprint

Securitize has a presence in various regions and jurisdictions. The company's six principal office locations are: San Francisco, New York, Madrid, Tel Aviv, Tokyo, and Buenos Aires. The company is thus capable of advancing its agenda and better meeting the needs of customers across the world.

iii. First-Mover Advantage

Securitize also holds a first-mover advantage, as it is "a pioneer in the digitization of private market securities on the blockchain" (Securitize, 2020). More specifically, Securitize was the "first and only platform to fully integrate compliance protocol with regulated marketplace ATS and to enable live trading security tokens with Securitize Markets" (Securitize, 2020). As a consequence, the company has a clear advantage over competitors in terms of access, market size, network effects, brand recognition, and accumulated learning.

Weaknesses are those factors that could make it difficult for Securitize to achieve its potential and accomplish its mission. These weaknesses should be minimized due to their negative influence on the growth and overall success of the enterprise.

i. Lack of Diversity at the Executive Leadership Level

The company has yet to fully embrace diversity in the composition of its top executives. For instance, there is only one woman in its top leadership team, which comprises ten individuals. Further, the company does not have an African American in this leadership team. This means that decision-making efforts could suffer from a lack of critical insight, particularly with regard to cultural competence.

ii. Not a Registered Broker-Dealer

As Crunchbase (2022) indicates, Securitize does not make offerings endorsements because it has not yet registered as a broker-dealer.

Opportunities are the various openings or chances that the external environment offers which could benefit Securitize. The company should recognize and exploit these unique chances, as they may not remain available for long.

i. Expanding Market

The cryptocurrency market is fast-growing; by some estimates, it "is expected to grow from USD 1.6 billion in 2021 to USD 2.2 billion by 2026, at a CAGR of 7.1%" (Markets and Markets, 2021). This presents a unique opportunity for Securitize to further expand its market share and improve its bottom line.

ii. Strategic Partnerships and Alliances

Securitize could partner with various other enterprises to acquire new capabilities or gain access to new markets. For instance, crypto assets are particularly popular in Russia; however, the company could find it difficult to enter this market due to existing regulations governing the establishment and operation of foreign companies, along with other barriers to entry. With this in mind, Securitize could partner with a Russian company operating in the digital securities space to gain access to this key market.

Threats encompass all external environmental conditions and scenarios that could impede Securitize's performance or prevent the achievement of certain business goals. These factors may be beyond the company's direct control.

i. Government Regulation

Securitize operates in a market that could face increased government regulation going forward, particularly given the recent growth of cryptocurrency markets. There have already been concerns about the possible use of certain digital assets in criminal activities. Additionally, most digital assets could be perceived as innovative financial instruments subject to increased scrutiny from governments and regulatory agencies.

ii. Competitors

With new and innovative products being introduced on a daily basis in this market, Securitize will likely continue to face increased competition. Key competitors include Wanchain, Quantstamp, Kadena, and TokenGet.

iii. Economic Conditions

Digital assets routinely experience significant fluctuations as a consequence of factors that affect their demand and supply, including macroeconomic events. In the case of an economic downturn, for example, people would have less disposable income and thus less to allocate to alternative assets such as digital securities.