FINTECH FUNDRAISING NOW: AN INVESTOR PERSPECTIVE
A Fireside Chat
Ryan Gilbert, Founder and General Partner of Launchpad Capital
Dan Rogers, CEO of FintechForce
We’re in the middle of the fall fundraising season and it’s hard to raise a round right now. More than ever, investors are looking for great entrepreneurs and businesses that match their model, versus the bubbly market of 2021. We’re taking the time to talk with Ryan Gilbert, General Partner at Launchpad Capital, to understand the market and what makes a winning deal right now.
Ryan, thanks for taking the time today to share your thoughts on the current investment landscape and how founders can score a term sheet in this environment.
- DR: Is anything hot right now? What types of deals is the venture community competing over right now?
RG: Compliance and security are in focus. Global and domestic risks are forcing enterprises to ask tough questions about their blind spots, and they are investing in defenses to ensure the sustainability of their businesses.
- DR: What segments do you think are interesting in Fintech or the broader market? Does this list change or evolve over time?
RG: Banks and credit unions are under tremendous pressure to grow and retain deposits while complying with a myriad of regulatory requirements, maintaining tight security, and keeping existing customers happy. That’s a lot! Innovative technology solutions hold the key to better banking. We’re excited to focus on this huge slice of the technology landscape.
- DR: Do you see AI in Fintech as a real opportunity? Is it overpriced already?
RG: AI is already driving huge efficiencies in businesses of all sizes. It’s remarkable to see AI’s rapid impact in content creation, finance data analysis and customer service and we expect many more sectors to be positively impacted soon. It’s important to remember that AI wins are not the result of recent venture bets; the leaders were established years back. OpenAI is an 8-year-old company partnering with 48-year-old Microsoft. While it’s tough to say that the leaders are generously valued, I do worry that the vast majority of early stage AI bets will be deeply out of the money for a long time.
- DR: When you find a company that looks interesting, what are the main criteria that a company has to meet before you consider drafting a term sheet?
RG: The 4 Ts: Team, Tech, TAM, and Timing. It’s essential to understand each of these well and appreciate the way they interplay. We consider a term sheet to be an application by our team to join your team, so we also need to be very sure that we all want to work together and that we can work together. The human relationship factor is critical, even in an AI world.
- DR: Presumably, investors have more leverage right now. How is that appearing in term sheets? Are you seeing crazy terms out there?
RG: There’s a good and fair balance in the early stage markets today. Seasoned investors who are committed to the sector recognize that the best founders need to have sufficient incentives to engage and partner. Aggressive terms in favor of either party should be a bright red light to stop and run away. If incentives are not fair and aligned you’re laying a foundation for future problems. Life it too short.
- DR: How do people get in touch with you if they want to share their company with you?
RG: Warm introductions from our network are always appreciated. Please email email@example.com. We look forward to connecting with you!
There you have it. Understanding where your next round of funding is coming from and the obstacles all investors are facing will help you find the middle ground and navigate through funding challenges. Knowing what investors need and aligning that with your startup can be a win-win for everyone.
CHARTING THE COURSE TO FINTECH SUCCESS
Financial Planning: How the Big Picture + the Details Can Help Navigate an Everchanging Industry
Maulik Nagri, Senior Manager, FP&A
In the fast-paced and competitive landscape of fintech, the notion of focusing solely on cash runway months can lead down a perilous road to failure: by looking at the gas gauge and not the road. Runway is undoubtedly important, but it should not be the sole determinant of your fintech business’s success, and it should not represent your plan. By neglecting comprehensive financial planning and failing to chart a clear course for the future, you run the risk of hitting the ultimate dead end in this challenging funding environment.
THE LANDSCAPE. The fintech industry is facing rapid evolution, technological progress, wide adoption, and regulatory changes. To be successful, a company needs a roadmap like a financial plan that amplifies strategic foresight and adaptability, assists in avoiding business failures, and charts its growth. Many statistics from the Small Business Administration (SBA) highlight the significance of financial planning in the highly competitive fintech landscape. SBA Data reveals that approximately 20% of small businesses fail within their first year, and around 50% fail within their fifth year. According to another survey, a staggering 83% of fintech CEOs who had a financial plan strongly recommended it to their peers. A solid financial plan is a suggested best practice but it’s also an instrument to increase the odds of business success. Investors in fintech companies are looking for more than just survival; they seek innovative solutions, scalability, and clear paths to profitability. Generally, companies with robust plans not only maintain healthy cash reserves but also attract greater funding opportunities and foster investor confidence.
TOOLS TO NAVIGATE THE LANDSCAPE. Would you travel in the Amazon jungle without a map? Would you drive through the mountains without a full tank of gas? Hopefully not. A well-laid out financial plan is a map for your business, and its runway is the gas. This comprehensive plan generally includes key elements such as a go-to-market strategy focusing on customer acquisition and profitable revenue growth, a deep understanding of unit economics, an accurate calculation of the cash required to reach crucial milestones, and a thorough analysis of sources and uses of funds. These components will not only provide a solid foundation for growth but also enable you to make informed decisions amidst the everchanging fintech landscape. What if you get lost in the jungle or the mountains – would you use your map or GPS for course correction? Absolutely. Like a map, a thoughtful plan lets you see the full picture and pivot to help ensure the achievement of planned outcomes.
THE BEAUTY OF THE LANDSCAPE. Contrary to common misconceptions, building a financial plan for your fintech company is not an expensive endeavor; rather, it is an investment in your business’s future. The true costs lay in the consequences of starting over from scratch when faced with unforeseen challenges. By dedicating time and effort to create a comprehensive financial plan, you equip your fintech venture with the tools necessary to navigate uncertainties, secure funding, and position yourself for sustainable growth.
Embrace the power of financial planning, and steer your fintech venture toward a bright horizon, and a future of innovation and prosperity. In the end, journeys are most pleasant when looking at the view rather than staring at the gas gauge.