According to CB Insights, last year, more than 20% of venture dollars went to fintech startups globally. Equally notable:
A third of all unicorns created in 2021 were fintech companies.
market this year Situations are dramatically different in every sector, including fintech. But while the pace of funding in the fintech space has been quite slow this year – and is falling – the fact remains that the sector still accounts for a significant portion of venture funding globally. In the second quarter, for example, about 18% of global venture dollars went to fintech startups.
To give Meczyki.Net+ readers specific insight into what fintech investors are looking for right now and what you should understand before contacting them, we interviewed eight active venture capitalists in the sector over the past few weeks. Their answers have been edited for brevity and clarity.
Here’s what we surveyed:
- Paul StamasManaging Partner and Co-Head of Financial Services, General Atlantic
- Alda Liu Dennisgeneral partner, starting capital
- Michael GilroyGeneral Partner and Co-Head of Fintech, Coat
- Justin Overdorffmate, Lightspeed Venture Partners
- Eddie LernerFounder and Managing Partner, Avid Ventures
- david jegenmanaging partner, F-Prime Capital
- Nick Milanovicgeneral partner, fintech fund
- Jai GanatraCo-Founder and Managing Partner, Infinity Ventures
Paul Stamas, Managing Partner and Co-Head of Financial Services, General Atlantic
Globally, fintech startups raised $131.5 billion in venture funding in 2021. As a firm that has been investing in the space for some time now, what difference have you seen in the landscape from this time last year? Were the deals more competitive last year?
There is no doubt that the deal environment is now slower than last year, especially with respect to late-stage growth. Many companies are focusing internally on optimizing their business and waiting to test the market. There still appears to be a bid-ask spread in private market expectations relative to public market valuations.
The deals feel a little less competitive, but there are still plenty of capital providers — General Atlantic being one of them — who are excited to continue investing in great opportunities and bringing back great entrepreneurs. The environment has slowed the pace of a deal, which, honestly, is probably a good thing. This gives companies and investors more time to get to know each other and work in both directions.
“Adversity breeds persistence, and we predict that some exceptional companies will emerge out of this market cycle.” Justin Overdorf, Partner, Lightspeed Venture Partners
Many are calling it a recession. How has your investment thesis changed over the past several months, and are you still closing deals at the same pace?
Our thesis has largely remained the same. We are still excited to invest in the long-standing theme related to the transition to the digital economy and the globalization of entrepreneurship, and we are actively pursuing opportunities to support visionary entrepreneurs with proven business models . It is always the case that we gravitate towards situations where we believe in, and where the company believes we can be a reliable partner and add substantial value. As we enter a more challenging macro environment, that promise may resonate even more. We think our 40-plus-year track record puts us in a position to help us through some of the most complex operating environments.
Fintech companies often have multiple revenue levers – adding new product lines, building in payments, and more. How viable will these levers be for fintech companies in 2022 to protect their 2020-2021 growth rates?