The fintech sector has had ups and downs lately, with Klarna experiencing significant valuation cuts, Fast shutdown and Robinhood and Better massive layoffs. Despite the turbulence in the market, investors remain optimistic about the potential value that financial technology startups can offer globally.
To understand how fintech startups are preparing to weather the current downturn, we spoke to eight investors who shared their thoughts on the market as a whole – both today and in the future.
Most investors agreed that there are opportunities in a downturn and that some sort of correction is actually not a bad thing.
“Despite the current market sentiment, our preference at Lightspeed points towards optimism. That doesn’t mean we’re putting things in the shadows for our founders — just to be clear, the road ahead will be tough,” said Justin Overdorff, partner at Lightspeed Venture Partners. “But we’re seeing the silver lining for companies who don’t let a good crisis go to waste, revise their assumptions about talent, scrap non-essential activities, sharpen their business model and consolidate their lead. Those who survive what comes next will emerge stronger.”
The group also agreed that a favorable unit economy and working with capital efficiency are more important than ever.
“Now, in an environment of rising interest rates, investors at all stages value companies based on fundamentals and prioritize capital-efficient growth while looking more closely at public market compositions for valuation guidance,” said Addie Lerner, founder and managing partner of Avid Ventures .
Many of the investors say the downturn hasn’t affected their investment thesis, while acknowledging that their pace of investment has slowed because they want to invest more discriminatingly.
“We have avoided many of the FOMO-based investments in unproven models, markets and products of the past two years, so the downturn is (so far) mixed to positive as we are able to hold our strategy as we invest in a more fund-friendly environment,” says Nik Milanovic, general partner of The Fintech Fund.
Read the full survey for an inside look at what fintech investors think about the industry, why they’re encouraging portfolio companies to pursue expansion, and how best to approach them for pitches.
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