While overall global investment levels may be in decline against the backdrop of a potential recession, the fintech sector continues to buck this trend. More specifically, global fintech funding has now risen to more than $100 billion (£77.4 billion), while this number is likely to increase exponentially in the near-term.
However, the global fintech market remains incredibly competitive, while the landscape may also change considerably once London (which is a major attraction for investors from throughout the world) and the UK leave the EU for real at the end of the transition period.
In this post, we’ll appraise the key challenges for fintech startups in 2020, and ask what steps can be taken to overcome them.
1. Raising Venture Capital or Strategic Financing
This is definitely a seminal issue in the current climate, particularly with the aforementioned threat of a global recession looming large.
However, the fact remains that raising capital financing is never easy for Fintech startups, thanks in part to the competitiveness of the marketplace and the stringent criteria that firms must meet in order to secure much-needed cash.
In fact, investors will ask a number of leading questions during their due diligence processes, including the precise problem that your venture has been created to solve, the size of the market opportunity and the knowledge, passion and experience of the founders.
In a challenging climate, you should also note that investors place a great stock in tangible assets such as valuable intellectual property. So, it may be worth partnering with legal experts such as Withers to ensure that your firm’s core value proposition is protected.
2. The Lack of a Great Investor Pitch Deck
On a similar note, both venture and strategic investors expect to see a concise summary of your business plan prior to accepting a meeting invitation.
With this in mind, you need to conceive a great investor pitch deck that’s capable of expressing your idea in a compelling manner, while keeping maintaining clarity and remaining as concise as possible.
In order to create the most effective pitch deck, the first thing to do is prioritise the key points that you’d like to make. For example, if your business has a unique value proposition or has the potential to tap into a lucrative market opportunity, you should lead with these factors and build your summary around them.
Similarly, try to create a pitch that demonstrates the true scalability of your venture, as will really help to hook investors and incentivise them with long-term gains.
3. Regulatory Issues for Fintech Companies
For any venture operating in the Fintech space, it’s important to understand the impact of a complex and fast-changing regulatory climate.
At the same time, there’s growing legislative pressure to deal with a number of existing regulatory hurdles, including the protection of user data and the safeguarding on intellectual property.
To navigate these fluid and difficult challenges, we’d recommend adopting a collaborative approach and working closely with regulators to ensure that your venture complies in full. It may also be worth recruiting a dedicated team to focus on driving compliance over time, or at least outsourcing this to a regulatory expert.
From a strategic perspective, it’s also wise to develop your own innate understanding of the issues and remain informed as trends continue to change.