Ten Years Eve Summer The use of free money has ended. Venture capital in the third quarter of 2022 fell $90 billion, or 53%, from the same period last year, and $40 billion, or 33%, from the second quarter, according to Crunchbase data. As such, Q3 2022 has been the slowest quarter for VC fundraising since the start of the pandemic.
But despite all the crazy talk this year, there is a real chance for aspiring fintech startups to become the new heroes of the multi-trillion dollar banking and embedded finance industry.
In particular, we hear that investors are reluctant to fund future potential unless it is accompanied by tangible customer traction. So if you’re building a fintech idea and need funding now, getting your product into the hands of your customers quickly is essential.
how do you do that? You can collect feedback, use it to clarify your focus and priorities, and ultimately reward your support.
Here are three tips for achieving these goals.
- Get feedback and insights from your customers with actionable products.
- Aim high in the long term, but don’t stick to anything but the minimum viable product (MVP) in the short term.
- Always remember the problem you are trying to solve for people and reward them for choosing you.
Collecting customer feedback and insights is key
All other things being equal, embedded banking startups and new fintech companies will be living or dying based on the user experience they provide.
In this operating environment, startups are more likely to impress investors if they can show tangible results.
What does it look like in practice? Before you head to your investor meeting, prepare your pitch deck for the following common questions.
- who is your user?
- What problem are you trying to solve for them?
- What do they like and what do they want?
- where are you going to meet them?
The only way to find these answers is to ship real things — working products that people can interact with and use. So everything we’re building right now should help us get our MVP out there.
I’m not saying, “If you build it, they will come.” Too many tech companies shut down factories because they were looking for a problem and building a solution. It’s very easy to slow down if you think too far ahead in terms of what you need to create.
For example, if you’re building a consumer fintech startup, do you really need to build your own payment processor? It takes millions of dollars a month and you end up building something that never sees the light of day.
A study by Bain & Co. found that 18 months is a very long time in an environment where fintech and embedded banking start-ups can go to market in three months. Plus, speed creates opportunity: The study found that US embedded financial transactions are expected to surge from $2.6 trillion today to $7 trillion in the next four years.