Navigating Challenging Economic Times
Survival tips for fintech founders by Azriel Chelst, VP, Direct Investment, FIS Ventures, FIS
Owning and operating a fintech will always come with challenges. In a perfect world, things would always work out: customers would buy your products, investors would line up to fund your next big idea, and regulations would align perfectly with your business model and offers. Sadly, we don’t do business in a perfect world. And during days like today, running a fintech can be downright challenging.
Competition is heating up. Customers are rethinking their budgets. And there’s the elephant in the room: the economy. It’s anyone’s guess where that will go over the next year.
Navigating these challenges can be hard. Doing it alone can be nearly impossible. We've rounded up some valuable tips to help you survive and thrive in your fintech journey.
In today's fintech landscape, your company's survival hinges on smart investment choices. The days of unchecked expansion and spending are gone. It's now about optimizing resources and delivering clear value. Every dollar spent must contribute meaningfully to your business. Whether investing in long-term growth strategies or expanding your team, ensure that your spending is lean and aligned with measurable outcomes. The key is reasonable spending to make your funding stretch further.
Much like unchecked growth of the past, aggressive valuations were once all the rage. Founders rested on past success or big ideas to justify larger valuations. Times have changed.
Investors now expect founders and business owners to back up their valuations. They’ll give the money if businesses can prove they deserve it. Hit a particular sales number? You’ve reached a valuation threshold. Prove your product is a market fit? You’ve hit another level of valuation.
If you can back up your valuation with hard numbers and metrics, investors will come.
Finding and nurturing the right partnerships are key to resiliency during tough economic times. When building partnerships, you need to determine the right number and size of partners your fintech needs. The size and maturity of your fintech will play a part in your decisions.
Smaller businesses would do better off with a handful of partners. This will help expose you to new and different ideas, but it will also help reduce your risk and potential vulnerabilities. As for the size of partners, larger banks and fintech software providers might be too big for you in the early days.
As your business grows, your partnerships will change. You might not need as many partners, but you’ll still want to diversify across multiple banks and fintech partners to create redundancy. And the size of partners will grow too. Your needs change, and smaller partners can’t deliver the support or services you need.
Remember that even if you aren’t starting with big partners, it never hurts to start the conversations and solicit advice. I love to remind my founders that if you ask for a sale, you will get a lot of advice; ask for advice, and you might get a sale. Don’t forget that the bigger the company, the longer the sales cycle.
In the business world, the age-old question remains: do you focus on nurturing your existing customer base or chase new ones? While loyal customers are essential, expanding your customer base is vital for sustained growth. Stagnation won't attract the investors you need.
Securing that first client when launching a new product validates its value proposition. As more clients come on board, your client base multiplies, and investors take notice. Now, you have the resources to invest in product enhancements or create new offerings tailored to your expanding customer base.
This juncture is also the ideal time to refine your target customer. While early stability is acceptable, shift your focus to clients aligning with your long-term vision as your business grows.
You’ll want a CTO with a knack for scalability and compliance
Your fintech’s survival hinges on one thing: technology that’s both scalable and robust. Tech that grows with you and is flexible and adaptable enough to make it through market expansion and economic contraction. Start with a tech foundation that scales with your ambitions. Like a good partnership, the right tech can make all the difference in how your fintech weathers the storm – economic or regulatory.
This is where a chief technology officer (CTO) can become a very valuable asset for your company. You’ll want a CTO with a knack for scalability and compliance on your leadership team. This will put a tech-forward thinker in a high-level position to help lead and guide your fintech.
Investors love a glimpse into your future vision, but they’re more impressed by your current stack. So, build smart and tackle today’s challenge while laying the groundwork for tomorrow.
Regulations. They can be a double-edged sword. On one hand, regulations can seem like barriers keeping you from tapping into new markets or industries. On the other hand, they can create new opportunities for your fintech.
Think of regulations as the guardrails on your fintech journey. They’re there to guide you, not block you. Sure, they change and take their time doing so, but that's where your strategic mindset comes into play.
And regulations aren't a one-size-fits-all deal. They vary from place to place. So, if you're taking your fintech global, you've got to adapt. You just need a good advisor on your side – someone who speaks the language of regulations fluently.
Balancing immediate profitability with long-term vision is crucial for fintech survival. While envisioning future technologies is exciting, generating revenue in the present remains the goal. Concentrate on delivering solutions that address current market needs, as promising future developments alone won't sustain your business. Obtain insights from mentors, potential customers and industry experts to refine your offerings. By solving today's problems while considering future possibilities, your fintech can secure its footing and prepare for evolving trends.
Fintech is ever-changing so the right survival strategies are crucial:
Be disciplined with your investments and investors
Set a realistic and obtainable valuation
Find the right partners to guide you along your journey
Listen to your customers
Build with scalability in mind
Stay updated on regulations.
By weaving these strategies into your fintech, you’re positioned to survive, thrive and pioneer a new era of financial innovation.
