EC Fintech

4 moves your firm must make now • ZebethMedia

By zebethcontrolPosted on November 14, 2022Posted in Column, EC Column, EC Fintech, Fintech, fintech infrastructure, fintech software, fintech startup, StartupsNo Comments

Grant Easterbrook Contributor Grant Easterbrook is a fintech consultant based in Amsterdam. His work has been cited in the media over 150 times. He also co-founded Dream Forward, which was acquired in 2020. This year marks the 10th anniversary of the fintech phenomenon. Companies such as E*TRADE, Rocket Mortgage, and TurboTax began to disrupt the established financial services sector well before 2012, but that year marked the turning point when fintech morphed into a sustained movement that would drastically change how most people manage their money. If you’re a fintech startup, you will face four main types of competitors over the next decade: Traditional financial firms offering more of a “super app” experience with strong member benefits and perks; Advanced decentralized finance protocols that can offer financial products that involve real-world assets; Increasingly common embedded financial products sold by non-financial firms; A government-issued CBDC in many (but not all) countries. Your firm will need a very strong value proposition to compete with all four types of competitors. This leaves most firms with two options over the next decade. One avenue is to specialize in a handful of products or services that you believe will have value on their own that consumers will sign up for despite robust competitor ecosystems. Alternatively, you need to develop a comprehensive strategy to compete and build a compelling suite of products, services and perks. How can fintech startups prepare to compete in the next decade? Here are four steps you can take to remain competitive. Any corporate strategy document will remain a fantasy on paper if your tech infrastructure is outdated and incapable of meeting your future needs. Your tech stack must support fintech’s cutting edge The foundational step of any long-term strategy for the 2020s is to revamp your firm’s tech stack to support future needs. You will need modern tech infrastructure that can support greater cross-product automation, a sophisticated AI assistant, more integrations with external parties such as the crypto ecosystem, and non-financial perks/benefits. The process for improving your tech stack varies based on the type of firm. If you work for a large bank still running COBL, the first step is likely a massive investment in a multi-year process to migrate to a modern and streamlined tech infrastructure. If you are a relatively young fintech company, you generally have more “white space” to design your stack. The challenge for smaller companies isn’t dealing with decades of tech debt; rather, it’s optimizing limited engineering resources to build the best possible tech stack. Modernizing tech infrastructure is a difficult and expensive proposition. Generally speaking, the best way to get company leadership on board with such investments is to highlight what competitors are doing to help them understand the competitive threat.

In times of crisis, fintech startups should take the long view instead of hibernating • ZebethMedia

By zebethcontrolPosted on November 10, 2022Posted in Column, EC Column, EC Fintech, Fintech, hiring, Startups, Verified Expert - lawyerNo Comments

Vadym Synegin Contributor Vadym Synegin is a Ukrainian impact entrepreneur, philanthropist and investor in fintech and crypto projects with more than 15 years’ experience as an entrepreneur in Europe and the UAE. More posts by this contributor 5 reasons why Ukraine’s fintech sector is growing despite war The fintech industry is currently facing several macroeconomic problems, including global economic inflation, skyrocketing costs of living, companies reducing their workforce, and a possible recession on the horizon, not to mention the war in Ukraine. All of these factors have caused fintech M&A exits to decline 30% in Q2 2022, the lowest point since Q3 2020. This is not the first time the economic climate has worsened so quickly. But when we look at the industry’s overall performance compared to previous years, the current downturn is not that different. What can founders do to help their companies prosper during this period? Hire high-performing talent The worsening financial climate is causing leading fintech companies to suspend hiring or reduce their workforce to avoid cost overruns. The industry saw 1,619 job cuts in May, compared to 440 in the first four months of the year. Personnel losses have also affected the Ukrainian startup ecosystem. More than one in ten startup employees in the country has had to leave their firms since the beginning of Russia’s invasion, and since then, the number of enterprises with up to five team members has risen, while companies with bigger teams are dwindling. Nearly every founder would agree that layoffs are a hard but necessary decision to make in times of crisis, as payroll spend can be redirected towards growth or maintaining a runway. But if you take the long view and look past the current downturn, it’s likely your startup will have higher chances of survival if you hold on to specialized talent. And sometimes, hiring a new employee can bring in a new perspective that may help you detect problems within your firm. Ukraine has a huge pool of talent, and thousands of specialists are currently searching for an exciting project to join. So instead of battening down the hatches as you face this crisis, consider it an opportunity to strengthen your company with dispersed, high-performing talent. Develop and prove the quality of your product Crises are also times of opportunities — you just need to look carefully to spot a golden egg. Crises give founders a chance to focus on building robust products since times like these usually highlight problems that are in need of a viable, long-term solution, and startups can go heads-down on building rather than focusing on incessant growth. The brutal truth is that tough markets also clean up the hundreds of startups without a solid product cluttering the market. This gives top companies a chance to develop an even more extensive set of products and services. Develop a solid strategy To run a business sustainably, founders must direct business development and manage risk well. That’s why during times of crisis, startups that have focused on developing solid business strategies and products usually emerge to win the market from those that didn’t. I know it’s hard to focus on developing a strategy when there are so many external factors affecting your company. But the fact is that companies that focus on strengthening their business plan and solidifying their strategy have a higher chance of bouncing back and coming out stronger than before compared to those who hibernate. Individuals and businesses thrive in the face of crises by managing their resources, analyzing the situation they’re in, and recognizing potential opportunities regardless of the amount of noise and chaos around them. Tough times allow teams that set big goals to recharge and look at things from a different angle. For instance, you might as yourself: What is the unique proposition of the product? What can we do to make the most out of the current market? What can we do to catapult our product even farther when the market recovers? Despite all the setbacks, founders can excel in business by following three rules during a crisis: strengthen your staff, develop a better product, and work to solidify a business strategy. While these aren’t laws or panaceas for all problems, I’ve found them to be very effective during rough times.

VCs decipher the recent fintech layoffs — and why they’re happening now • ZebethMedia

By zebethcontrolPosted on November 4, 2022Posted in Chime, EC Fintech, EC venture capital, Fintech, Layoffs, startup valuations, Startups, stripe, tech layoffsNo Comments

Many big companies in the fintech world cut jobs in the past month. And yet Stripe’s announcement it would lay off 14% of its workforce still made a splash, proving that unicorns and decacorns are not immune to the challenging economic and fundraising conditions. The Stripe news closely follows Chime confirming this week that 12% of its employees would be laid off and Brex revealing last month that it was cutting 11% of its workforce. So what the heck is going on here? Well, according to Spiros Margaris, a fintech venture capitalist and founder of Margaris Ventures, the current layoffs by some of these larger fintech companies were “caused by the challenging geopolitical market environment and inflationary pressures. It affects the whole fintech startup industry — and globally all industries — since the prominent players have a strategic ripple effect on the smaller players.” “Laying off good employees endangers their strategy to succeed in the grand vision they initially sold to the VC.” Spiros Margaris, founder of Margaris Ventures Cameron Peake, a partner at Restive Ventures who recently invested in AiPrise, concurred, noting via email that much of what we are seeing today “were the dynamics we saw play out last year,” including all of the “large funding rounds, sunny market projections and a belief that companies needed more people to fuel their growth.” What resulted was “a lack of discipline around company fundamentals,” she added. While the frenzy was dissipating, it was then that companies “realized they were not only ahead of their skis but that they needed to cut back in order to focus more on profitability,” she said.

Why Robinhood and Coinbase gained ground after reporting earnings • ZebethMedia

By zebethcontrolPosted on November 4, 2022Posted in coinbase, Crypto, EC Cryptocurrency, EC Fintech, EC Newsletter, federal reserve, Fintech, Robinhood, Startups, The ExchangeNo Comments

You’d be forgiven for expecting public fintech companies that facilitate consumer trading to be under pressure this week. And yet, after reporting earnings, the share prices of two pandemic-era highfliers gained ground. Coinbase and Robinhood up? In this economy? Yes. Of the out-of-fashion tech sectors, consumer trading has to be among the most out of favor. And yet. ZebethMedia wanted to better understand investor response to results from both Coinbase (crypto-focused) and Robinhood (equities-focused) to figure out what drove each company’s shares higher in the wake of their reports. The answers, it turns out, are partially related. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. In an ironic twist, some of the forces that have made consumer trading less attractive are the very same impulses helping the two companies derive more revenue from a previously less-critical part of their business. The Federal Reserve taketh away, and the Fed also giveth some back.

3 investors explain how finance-focused proptech startups can survive the downturn • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in EC Fintech, EC investor survey, EC Real Estate and Proptech, economic downturn, Fintech, proptech, real estate tech, StartupsNo Comments

In the early days of the COVID-19 pandemic, interest rates for mortgages dropped to historic lows. Predictably, home buyers made hay, taking full advantage of the favorable financial environment to pick up new homes and refinancing mortgages on their existing homes. Startups operating in the financial side of the real estate tech market suddenly faced a surge in demand, and many departed on hiring sprees to keep up. But as those interest rates, housing prices and inflation began to climb back up, demand slowed dramatically. This meant that the once high-flying startups were suddenly dealing with the opposite problem — too many employees and not enough transactions to make money. Layoffs became widespread. Shutdowns were a thing again. As interest rates soared even higher, the once frothy market morphed into an environment where only the fittest could survive. We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. To get a sense of how investors who have backed proptech startups with a financial focus are dealing with the market shift, we reached out to three active investors. The trio shared their thoughts on everything from what types of startups in the home buying and lending space have the best shot at survival to the advice they are giving startups in their portfolios. Pete Flint, general partner of NFX, noted that the chances of survival are higher for proptech startups that let consumers fractionally invest in properties and increase access for those seeking a rent-to-own approach. “The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival,” he said. Nima Wedlake, principal at Thomvest Ventures, agreed, noting that agility is a critical trait. “Startups that survive this period will adapt their product offerings to meet the needs of today’s homeowners and buyers,” he said. In such a climate, companies that help others navigate tough times seem to be in special demand. “Companies that sell software that enables cost-cutting or additional lead-generation opportunities are seeing accelerating adoption as incumbent mortgage companies realize they need an edge to drive demand,” Zach Aarons, co-founder and general partner of MetaProp, pointed out. “If a startup can prove its users see significant savings, then they shouldn’t have a hard time being successful in this market,” he said. We spoke with: Editor’s note: For a more complete picture, we’re examining the proptech sector from three different angles. This survey covers proptech startups with a financial focus, and we’ll soon publish a survey that looks at upcoming tech in the space, and another that examines the environmental impact of proptech and what startups are doing to minimize their footprint. Pete Flint, general partner, NFX Startups doing anything related to home buying or lending have struggled this year. Which types of startups operating in the home buying/lending space do you think have the highest chances of survival? Resilient proptech companies have to be able to navigate the cyclicality of the industry. It is embedded in the category, and with the long housing and tech boom, many founders have underestimated this. In my view, it is less about the “type” of startup that is more likely to survive now and more about what the startups do to respond to this moment. The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival. The verticals that we think will be more resilient during this economy are:

Fintech fundraising has reverted to the mean • ZebethMedia

By zebethcontrolPosted on October 12, 2022Posted in cb insights, EC Fintech, EC Newsletter, EC venture capital, Fintech, The Exchange, venture capitalNo Comments

Global startups focused on building financial technology saw their fortunes improve last year as investors doubled, and more, the amount of capital flowing into fintech companies, measured on a quarterly basis. The comedown from those highs took longer. But, today, looking at Q3 2022 data from CB Insights, it’s clear that the fintech funding boom is behind us; even more, global fintech funding activity is now back to where it was before 2021, indicating that last year was more aberration than new normal for the startup category. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. It’s a well-trod statistic that around one in every five venture capital dollars raised in 2021 went to fintech. It is also no huge surprise that after a heady year, fintech fundraising has fallen along with overall venture activity. But the portion of venture capital disbursement that fintech can lay claim to is also in decline. Let’s chat through the numbers and then ask ourselves what a new valuation landscape, a changed venture capital market, and a frozen IPO market mean for fintech startups large and small. To work!

The profit divide running through the neobanking sector • ZebethMedia

By zebethcontrolPosted on October 11, 2022Posted in Chime, EC Fintech, EC Newsletter, monzo, N26, neobanks, Starling, Startups, The Exchange, VentureNo Comments

Neobanks are wagers that modern, digitally native services can supplant the traditional banking landscape. Founders flocked to the idea, investors wrote myriad checks, and despite how far along we are in the neobanking boom, startups are still being formed today to attack the problem space. Lately, we’ve seen neobanks focused on targeted niches, often segmented by demographics. Startups are building for populations that may have been left behind by the traditional banking world. But not all are so specific. Many of the best-known neobanks are in fact rather general, hoping to attract a large customer base from one geographic area or another. The Exchange explores startups, markets and money. Read it every morning on ZebethMedia+ or get The Exchange newsletter every Saturday. You know their names. Chime is perhaps the best known in the U.S. market, Monzo and Starling are leading players in the U.K., and N26 is busy working to grow in Europe.