Fintech 🧠 Food - Bank and Fintech Partnerships

Hey everyone 👋, thanks for coming back to Brainfood, where I take the week's biggest events and try to get under the skin of what's happening in Fintech. If you're reading this and haven't signed up, join the 32,338 others by clicking below, and to the regular readers, thank you. 🙏

Hey Fintech Nerds 👋

Does it feel like the landing was soft?

Did the Fed pull it off?

Or maybe the economy is just not ready to call it quits.

On the one hand, big tech is roaring, Bitcoin feels solid, and the seed-stage investment arena feels hot and exciting again.

On the other, we have a long way to go before the pain in the banking sector is over. Small and regional banks are forced into M&A to shore up and diversify their balance sheet, whether that’s good for customers. When your bank gets acquired, you might suddenly end up with new fees you never expected.

Our actions to make banks “safe” also force them to become big and mean.

The incentives are broken.

This creates an opportunity for Fintech companies, now diversifying their revenue streams away from interchange and possibly going global. Robinhood is hiring for its UK launch, and Bunq just raised for its US launch. (See Things to Know 👀) And nothing triggers Fintech Twitter like a European Fintech entering the US market. I mean how could it ever possibly succeed? Don’t you know the USA is exceptional? (Sure, but Klarna?) 😉

How was your first week with FedNow? I’m guessing most of you haven’t used it yet. Visa Direct and same-day ACH will dwarf FedNow volumes for a while, but it creates a platform for competition among payment systems in the long term. Imagine if Fintech companies were allowed access? (See Things to Know 👀)

The big news in the UK this week is Natwest’s CEO resigning over a controversy where it appears she leaked the de-banking of a politician to a journalist. Aside from that leak being a rookie error, what troubles me is how the political elite then rounded on a successful female CEO to have her ousted. A bank de-risking a politically exposed person, because they cost too much to service, are not profitable and carry reputational risk is something that happens often whether we like it or not. And it’s a judgement call.

Being a bank is hard.

Understanding their pressures to sell to them is critical.

This week’s 📣 Rant is aimed at Fintech companies selling to financial institutions. I’ve found myself giving the same advice often lately. So here it is in long form.

PS. Thanks, Alex Johnson, for hosting me on Fintech Takes - we talked through 4 Fintech companies, including one that legit blew my mind. Check it out here.

PPS. Congrats to the Bloom Money team on their pre-seed. Nina has been a serial operator turned founder, excited to see what’s next.

PPPS. I’ll be speaking at Fintech Devcon on the 23rd of August in Austin, TX, on “mistakes everyone makes in Fintech.” You don’t want to miss this!

Here's this week's Brainfood in summary

📣 Rant: So you want to sell to a bank

💸 4 Fintech Companies:

1. Capstack - The bank balance sheet marketplace

2. Code - Digital paper cash

3. SquadTrip - Plan, book, and pay for group trips app

4. Hello Neighbour - The digital rental real estate agent (UK)

👀 Things to Know:

1. FedNow is live

2. Goldman, Bunq, and Wise results + Bunq raises $111m

📚 Good Read:

1. Global Fintech Funding down 48% QoQ

Weekly Rant 📣

So you want to sell to a bank?

Many Fintech infrastructure companies have lost their early customer base in the Fintech winter. The consumer Fintech and Crypto companies who were early adopters and customers are going bankrupt, getting acquired, or cutting their budgets.

But have no fear Fintech company.

Just go sell to the enterprise.

90% of banks want to buy from a Fintech company. They need better digital solutions. That could be you!

Larger enterprises sign longer contracts for multiple years and are far less likely to go bankrupt. Large banks have IT budgets in the billions. Billions!

Problem solved?

Not exactly. Selling to an enterprise is different, and no one size fits all. Selling to a small bank is vastly different than a large bank. You have to understand how they budget, how they buy, and who their existing suppliers are. 

Otherwise, you'll spend years having meetings, even get yourself involved in several RFPs, but never win the contract.

Let's dive in 🏊‍♂️

1. Why would you want to sell to an incumbent?

   1. It's a giant revenue opportunity with high revenue certainty.

   2. Some incumbents have less price sensitivity.

   3. Getting one can lead to many.

2. Understanding their world

   1. Their tech estate is incredibly hard to change

   2. Not all job titles are created equal.

   3. Relationships matter.

   4. They have huge volumes and expectations

3. How they buy

   1. Innovation departments have PoC budgets

   2. The sign-offs before procurement

   3. Approved supplier list and MSAs

   4. RFI and RFP process

   5. Procurement and contracting

   6. Going live

4. Your competitors

   1. Legacy providers have MSAs and enterprise sales and may already be integrated

   2. Consultants run the show

   3. Other Fintech companies might make good frenemies

5. How to succeed

   1. Set yourself up for success with mature, well-documented processes

   2. You’re likelier to be an addition than rip and replace

   3. If you're doing something core, start as a satellite

   4. Bigger existing suppliers can be helpful

6. How do we get more bank and Fintech partnerships?

   1. Integration marketplaces can speed up time to market

   2. Institutions changing buying behavior might happen 🤞

   3. BaaS platforms help the people they work with

   4. Legacy providers have marketplaces that could do more

   5. Political and regulatory pressure will create better outcomes for the whole market

7. Closing thoughts

1. Why would you sell to an incumbent?

a) It's a giant revenue opportunity with high revenue certainty. Big companies represent 7 or even 8-figure deals from one sale. Often they prefer longer contract lengths like 3, 5, or even 10 years. A provider winning these contracts could make their entire revenue target with one deal. Depending on the product being sold, the incumbent might have high switching costs, so you have a good chance of staying there once you're in. 

b) Some incumbents have less price sensitivity. If you sell a critical service like "core banking," where you are the system of record, incumbents will pay more than a smaller company. In return, they expect a high quality of service and certainty. I've seen examples where a software license is 6 figures for a company with 000's thousands of accounts but 7 figures for millions of accounts. Again, do not underestimate the level of service these companies will require. The expectation is much higher in return for those fees. 

c) Getting one can lead to many. Banks like to know another bank is using your service. You might hear, "Everyone wants to be first to be third." Put another way, they might be super excited by your product or partnering with you, but until you get another couple of banks as clients, they won't. If you do have a few bank clients, then you have a great shot at winning more. 

They sign long contracts for high dollar amounts and move in herds. What's not to like?

In short.

Everything else. 

Unless you understand the psychology of that organization, its pressures 

2. Understanding their world

a) Their tech estate is incredibly hard to change. For most banks, their IT systems were built long before modern software engineering existed. Billions of lines of code are hardwired to 1,000s of systems, procured over 3 decades. Life inside a bank is a constant battle to deliver anything, with priorities and delivery dates always shifting. The odds of your new Fintech API replacing an existing supplier is near 0 (depending on what it is you offer).

b) Not all job titles are created equal. Getting a meeting with a bank is easy, but getting a contract is much harder. After three meetings, I've met so many founders who have "Giant bank" in their midstage pipeline, and I can't help but think, "Aww, that’s not mid-stage at all." Most innovation departments don't have a direct budget to procure and act as a matchmaker to "internal stakeholders." In some banks, a "head of" department has a budget but will need 25 sign-offs to complete anything. A CEO might get excited by what you do but then will typically hand you off to someone lower down who might be worried your tool could upset their job security.

The role may vary by institution too. A regional or privately owned bank might be able to get its approvals quickly. A tier 1 global bank likely has more processes.

c) Relationships matter. Credibility is everything in financial services. There are cues, code words, and jargon that suggests credibility. A decision maker in a bank got there by not wasting time and delivering. If you come in like an excited puppy promising to solve world hunger overnight, you will lose credibility. If you understand the world they operate in, and the constraints your stakeholder faces and are ready to work with them over time, you'll earn trust and potentially, one day, a massive contract.

d) They have huge volumes and expectations. Putting the wrong supplier into their tech and customer ecosystem can be catastrophic. After a massive IT failure in 2018, one UK bank CEO resigned, and its former chief information officer has now been fined personally. A bank about to put 10m customer accounts on a new something wants to be really sure it won't go wrong. 

They'll expect incredibly high-performance SLAs, detailed reviews, and oversight. The best bank enterprise salesperson I ever met said, "We have the best SLAs in the business and can handle all the volume you throw at us; our mainframe is bulletproof." The message? Safety. That's not the only thing that matters here in 2023, but it's a huge deal.

Anecdote: Ever heard of five nines? It means 99.99999% uptime. I've seen negotiations where "four nines is our standard, and we offer five nines with enhanced support." Five Nines is 3.1 seconds of downtime per year. I hear you wondering how is this possible; why would you ever contract for that!? Well, that uptime only applies to "unplanned outages." In the days of a mainframe, a "planned outage" was when a system would be taken down over a weekend because you had to take systems down over a weekend to make meaningful updates. Use this to your advantage.

3. How incumbents buy

a) Innovation departments have PoC budgets. I've seen many bank innovation teams with a sign-off limit of $50k" or $100k. This usually comes with caveats like "so long as it doesn't touch real customer data." There are exceptions to every rule, but the takeaway here is that your "6 figure deal with a bank" might lead to nothing more than consulting. The best innovation departments are bringing their real budget holders along for the whole journey, but they're not all created equal.

b) The sign-offs before procurement. If you're outside a formal request for information (RFI) or request for proposal (RFP) process, then the bank has to secure a budget and sign off to buy something. The budget has to come from someone's pot, and budgets are assigned annually. There are countless committees and layers of committees at the bigger banks that need to get approval. I've seen 6 months of work to take something to a budget committee. This can make or break your year as an employee. It's the kind of meeting where everyone should be onside before the committee, but anyone can say no, and no single person has the authority to say yes. 

And that's just budget. Now repeat this for security, risk, governance, etc. 

c) Approved supplier list and MSAs. Assuming a purchase is fully signed off, most of the time, this will result in an RFI or RFP creation. These are placed onto a procurement portal and automatically distributed to the approved suppliers of that institution. Winning a one-off contract is hard, but becoming an approved supplier is a gauntlet. If you think about the pressure from regulators on "3rd parties," one of the main controls is making suppliers pass countless risk, governance, and security reviews before they can be considered for a contract. 

Every bank does this differently and typically sends a risk assessment spreadsheet to a provider to fill in. These spreadsheets typically have 100s of questions and don't always have well-built validation (I've seen examples where a "Y/N" cell can be filled in with any word you choose). You'll need years of accounts, policy documents, accreditations, and process documents to demonstrate "financial resilience." 

The end result of this spreadsheet is a "risk score." This might subject you to further reviews by other departments. The person in the procurement department doesn't own the full process and relies on internal stakeholders to give assessments. Those stakeholders might not always be responsive. This process can be slow. And almost nobody knows how it should work.

But your prize for persistence is getting a master services agreement (MSA). Once you get this, you'll get all future RFPs in your category.

d) RFI and RFP process. Once issued, an RFI will have rules like "you have 14 days to submit questions" and "your questions and answers will all anonymously be shared with all participants." After ~30 days or more, all responses are submitted. On the inside, the bank will have a handful of people from various teams reviewing responses. This is usually recorded on a spreadsheet. There's a mix of quantitative (scoring) and qualitative (discussions). The downside of this approach is buying through a committee can lead to selecting the least worst product instead of the best. Knowing who's influencing this process is critical for your chances of success.

This might involve multiple stages, so a "top 3" might be invited to give in-person presentations and demos. During this process, the procurement team is working in the background to grind down pricing and play off each of the supplier's offers against each other (albeit not directly).

e) Procurement and contracting. An entire profession of people spend their time on the phone negotiating prices with suppliers, and their bonus is calculated based on the discounts they secure. As a small company, you can be steamrolled easily. Your internal advocates can help here within limits. Assuming you agree to a price, then you move to the contracting. 

Large institutions have standard templates and almost never budge on them. Time is their friend and your enemy. They'll wait you out as a negotiating strategy quite often. I've seen outrageous clauses included by default, like expecting a tiny Fintech provider to take unlimited liability for any action the institution takes. To say this is lopsided is an understatement. The bigger providers can take their time and have an army of people whose full-time job is playing the contracts and procurement game. That's their sales advantage.

f) Going live. An EY survey found that 40% of bank and Fintech partnerships fail to operationalize. You could win the contract and never get revenue unless you understand the complexities of delivering anything in a large institution. The level of handholding required is exceptional. 81% of banks told Cornerstone they struggled to integrate with a Fintech company because they lack experience with APIs. You can’t just send the link to the API docs; that won’t work.

This is where the systems integrators make money and can be very helpful. 

4. Your competitors

a) Legacy providers have MSAs, and enterprise sales and may already be integrated. These providers will have economies of scale and might offer better unit pricing than your product. They might be selected even if their product doesn't perform as well or create a business case as good as yours does because they have a feature that's 70% as good, and it's more ready to go because they have the contracts and integration done.

b) Consultants run the show. Strategy consultants (Mckinsey, Bain, et al.) back seat drive most organizational strategies and will recommend vendors to include in RFPs. Systems integrators (Accenture, Cognizant, et al.) will likely win the work to integrate the new vendor into the existing tech stack (or at least be a part of that process). Staying on the right side of these orgs can be very helpful. The systems integrators yearn to do more cool work, and if you're a Fintech company, you're cool. The downside is they're all targeted on sales, and often the biggest sales come from selling a lot of bodies to maintain an existing system. 

c) Other Fintech companies might make good frenemies. The default sales motion of most Fintech companies is to try and be all things to all people. On some level, that makes sense because you just want to get in to that client. But from the institution's perspective, they might want pieces of what you do. The best strategy here is to be open and sell what you're a specialist at if the option arises. 

5. How to succeed

a) Set yourself up for success. First, drop the assumptions; bankers are not stupid (far from it) and fully understand their organization's complexity and how you can help. You cannot spend too much time on compliance, infosec, and data governance. Well-documented processes will demonstrate risk management maturity, and a tenured head of compliance can be your secret weapon.

b) You’re likelier to be an addition than rip and replace. Institutions already have 15 providers for just about everything in every market. But new regulations, fraud patterns, or external events like pandemics can rapidly shift who institutions buy from and what they look for. PSD2 and GDPR created a wave of specialist companies, banks transitioning to the cloud has created opportunities, and the rise in P2P payments apps and authorized push payment fraud (APP fraud) is a huge pain point. The nature of how institutions do RFPs tend to be comprehensive, and you have to be in it to win it, but stay flexible and be pragmatic about your limits when meeting in person.

c) If you're doing something core, start as a satellite. The Fintech companies that have successfully won the "core" system of record deals with incumbents came in at an angle or alongside the existing tech stack. nCino started in loan origination and built from Salesforce a CRM-first approach. The platform sat between digital experiences and underlying existing systems to reduce reliance on those older cores and eventually replace them. 10x Banking is working with Chase to deliver its UK bank branch as an entire greenfield tech stack. 

d) Bigger existing suppliers can be helpful. Consultants, core providers, and even law firms can be incredibly useful. The right strategy leader has relationships at the top of the organization and is incredibly sensitive to what their stakeholder and client cares about. If you fit that dynamic, you could be in the right place at the right time. Lawyers are always close to any legislative change, and while they can't "pick vendors," they get asked for all kinds of help on "who are the types of folks who could help with problem x from new regulation y." Being top of mind here is very helpful.

Institutions want to buy more from Fintech companies the provider.

Fintech companies want to sell to institutions.

In the middle is 30 miles of solid granite. 

So. 

6. How do we get more Fintech providers into bank partnerships?

Several things are happening at once.

a) Integration marketplaces. Companies like NayaOne and Techpassport act as a two-sided market between Fintech APIs and banks. A Fintech company can upload its profile to the marketplace and, in some cases, test its service against existing synthetic data sets to prove its value for an institution. This doesn't solve the culture and procurement issue, but it can help with some operationalization and go-live issues. The health warning here is that every bank's IT stack is different under the hood, and these marketplaces typically don't integrate deeply into the banks. I'd love to see that change, but that will take pressure on the banks, similar to open banking regs, I suspect.

b) Changing how institutions buy. A venture-backed firm might be loss-making but have a positive cash flow trajectory. This would still be a red flag in most procurement processes. If institutions want more digital, the single best use of the time they could make is re-designing how they do procurement. The processes were built for giant contracts with vendors who played the enterprise sales game but are not fit for purpose with Fintech partnerships. The forward-leaning institutions have innovation teams deeply embedded in procurement and who have experience managing those processes.

c) Banking as a Service platforms. By its nature, a BaaS platform is integrated with one or many banks and one or many Fintech companies. They can become a great leverage point or scale if a bank operates in the BaaS space.

d) Legacy provider marketplaces. Companies like Temenos, Finastra, and FIS have a "partner ecosystem" where a Fintech company can integrate with the core systems of record used by a bank centrally and then be deployed by that institution. These marketplaces are as good as the incentives given to the core banking enterprise sales teams to sell them. If the provider sees an upside, they'll help re-sell you, but there has to be a client or commercial driver there. Chances are you're not what makes their year unless you can help them land new revenue at almost zero effort. This is a massive opportunity for legacy providers to step up and lean into partnerships.

e) Political and regulatory pressure. In the recent guidance from OCC, FDIC, and Treasury, the agencies noted that smaller banks can use Fintech suppliers. This is a signal to banks worried the "regulator will say no" isn't true. Risk is a risk, and younger companies can well manage it. We need much more of this. We will get a much more efficient and competitive financial services sector if new providers have routes to market. The UK regulator, the FCA, just announced its permanent digital sandbox, which lets Fintech companies try something new with direct handholding from the regulator and shortened approval cycles in return for sharing data during testing phases.

7. Closing thoughts

Some large financial institutions get all of this, of course. Many are now picking where they in-source critical functions (like data and machine learning for AML), partner (in areas like digital account opening) or acquire (like Fifth Third acquiring Rize Money). 

The biggest lesson is education on both sides. There's a small handful of people out there in the banks or Fintech companies that really get this stuff. But it's not all of the people in all of the job roles we need if we want to level up partnerships by a factor of 10.

The reality is Fintech partnerships are still way too hard.

But don't let that discourage you.

If this sounds like a lot of work.

There's always one bank that will make the leap.

Find your advocate; find someone who can get it done.

Then the other banks get to be first to be third.

Go get it.

ST.

H/T to Walt Cox whose thread around this on Twitter got me thinking.

4 Fintech Companies 💸

1. Capstack - The bank balance sheet marketplace

Capstack allows banks to diversify sources of deposits to fund their balance sheet. In the wake of SVB, community banks exposed to one client type need to ensure they don't have further deposit flight or that there's always a buyer of loans. One bank might be strong in SMB and another in consumer. Capstack allows these two banks to borrow/move each other's deposits or participate in loan funding by building a marketplace.

🤔 This is putting the Fin in Fintech. It turns a network of community banks into a more diversified virtual bigger balance sheet. What was once a very industrial, ignored department of the bank is now in full view and a huge area for disruption. Asset and Liability Management (ALM) is an art form, but it lives in spreadsheets, PDFs and has a huge visibility problem. Banks are only as diversified as the deposits they can source and the loans they can sell. A marketplace makes that much easier. I'm curious to see if this moves up the market into Fintech companies with a charter, sponsor banks, and even regionals. 

2. Code - Digital paper cash

Code is a mobile app that replicates the cash experience. Users create a "note" or "bill" in any currency with a QR code. Another user scans that QR code and has that currency delivered as Crypto (cash). Code is instant, shields user's privacy, and is free to use. It can be used by anyone, anywhere in the world.

🤔 The UX here is perfect. This is how you replicate a cash experience on mobile. When I saw it, my first reaction was, "Why hasn't someone done this sooner." Under the hood, this uses the Cryptoasset Kin, which runs on Solana, which is instant and much cheaper than alternatives like Bitcoin or Ethereum. Code is not for profit and plans to fund itself via subscriptions like Signal or Twitter. The terms of service are fascinating; it essentially says that as a user, you're in the same place as a person traveling with cash across borders and subject to the same laws.

3. SquadTrip - Collect recurring payments for group trips app

With Squadtrip, a trip planner can set up recurring payments and have it look simple with a hosted site, invoices, and receipts. SquadTrip charges a 6% processing fee per transaction. The service is targeted and destination weddings, travel brands, and "that one friend who always organizes trips."  

🤔 Is 6% worth the reduced hassle? I like these scaled niche businesses. For some napkin math, imagine an average group of 10 pays $1,000 per trip. Let's now assume the service has 500x trips per month. That would be a total processed volume (TPV) of $5,000,000 (10k *500). 6% take rate is $300k, and assuming 3rd party costs are half of that, that's $150k MRR. That feels very achievable. My question is, how big could it be?

4. Hello Neighbour - The digital rental real estate agent (UK)

Hello Neighbour provides a 100% digital real estate service for landlords. It promises them high-quality renters and packages a full service of hosted viewings, 3D tours, inventories, referencing, and insurance.

🤔 That whole landlord, renter space is seeing a wave of innovation. It's ripe for better financing solutions, but finance, by its nature, needs capital. There's a niche to be made in being able to package and distribute the lending landlords, and renters need to move around more often and easier.

Things to know 👀

1. FedNow is live

35 banks have adopted the new real-time payment service from the Fed called FedNow. The service makes instant paychecks available for consumers, instant B2B payments, and instant liquidity for merchants. 

🤔 Payments company Adyen is on FedNow. Everyone forgets Adyen is a European bank, and the Fed lets internationally chartered banks use its systems. Imagine if you're other Fintech companies watching that though 👀 

🤔 35 out of 9,000 isn't many. It's early days, but this has a long way to go. Many banks are "struggling to upgrade" to the new payments file format ISO20022. I find that ridiculous. ISO20022 has been the default for international wires (SWIFT) for at least 15 years. Tech change at a big bank is hard, and deadlines always get missed (I know, I've done it), but c'mon, guys. 

🤔 This isn't UPI or Pix for the US. It's not even Faster Payments because it exists in a world where RTP already exists with The Clearing House, push-to-card, Zelle, CashApp, and Venmo. Pix was so effective because it was mandated with a hard deadline. 

🤔 FedNow does create a platform for competition. I'd be excited to see Neobanks and Fintech companies get access to FedNow and the FedNow link to global RTP systems. That would give FedNow an edge over other payment systems and help it find its space in the payment landscape. 

2. Goldman, Bunq, and Wise results 

Goldman's profits are down 58%, Dutch digital bank Bunq has 9m customers and is profitable and cross-border payments app Wise reported H1 52% YoY profit growth at £92m ($118m). Bunq also raised $111m in a flat round from existing backers to fund US expansion.

🤔 Becoming a profitable Fintech is hard, as Goldman is finding out. Whereas 5 years ago, the bankers would point at Fintech companies and say, "See, they're not profitable." It is ironic to see the bank that went big on consumer 

🤔 Goldman has a perfect storm. It's getting hit on all sides, with a $504 million loss on the sale of GreenSky, a $485 million loss related to real estate, and $615 million in credit losses in its consumer business. Commercial real estate is in trouble, and it could get worse; their consumer business consistently seems to have credit loss issues. How much of that is from Apple Card, and would that be why Goldman is rumoured to want to exit that deal?

🤔 Goldman is paying the price for going too big too fast and then not being able to stay the course. In isolation, entering consumer, wealth, BaaS, and partnerships make sense. But spending the amount they did in the space of time they did makes less sense. Big bank disease is believing something has credibility only if it "moves the needle in 12 months," which is the wrong way to build a sustainable business.

🤔 Many European digital banks are now profitable, but Bunq is a unique animal. The founder owns 90% of the company as a serial entrepreneur. The company focuses on digital nomads in Europe, and I suspect with US expansion, they’ll follow their European clients who become expats. They’ve timed the digital-first, freelancer, live-anywhere lifestyle shift perfectly.

🤔 The digital banks doing well in Europe all have licenses and lend. I wonder if we ever see the same in the US? Bunq says its user base grew from 5.4m to 9m in a year, with 50% of those users subscribing or generating interest income. Bunq is the "bank for digital nomads" with 3.7% savings in GBP and USD and 1% cash back for its subscription plan users.

🤔 High-interest rates came at the perfect time for digital banks. These banks have the lowest operating costs, lots of users, and now their lending has become profitable. They're here to stay and a part of the landscape.

🤔 The banks are scrambling to replace these flows. Wise saw £28bn of payment flow in the quarter. Those payments didn't happen over banking rails, and banks charged more. That's a material hit to their profits.

Good Reads 📚

1. Global Fintech Funding down 48% QoQ

Global Fintech funding was $7.8bn in Q2 2023, with $100m+ mega-rounds making 2bn of the total. Payments funding had the largest fall of 75% QoQ, the biggest decrease across all sectors. Despite this, LATAM-based funding doubled, making it the only region to see QoQ growth.

🤔 Look at that trend line. Excluding 21/22, it's mostly flat. 

🤔 Beware the temptation to view this as bad news. The funding level was the "lowest" since 2017. Historically 2017 was not a terrible year for VC funding, especially in Fintech. There is arguably a class of growth companies with valuations ahead of their revenues that are not getting the next funding round. It's a positive for the long-term health of the industry that these valuations normalize

🤔 Stripe raised 6.5bn in Q1 which skewed the numbers. Fintech will likely not see an investment year like 2021 ever again, so any expectation that was coming was probably wrong. But Fintech isn't dwindling, far from it. It is just getting started.

🤔 Beware the temptation to over-correct. Now interest rates are high, everyone is pivoting to lending. The risk of shifting the entire business is that it could leave companies at risk if interest rates start normalizing. Yes, it's vital to react to the external environment and pivot sometimes, but keep an eye on the long-term goal and have conviction in long-term market changes.

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

Disclosures: (1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees. (2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a * (3) Any companies mentioned in Rants are top of mind and used for illustrative purposes only. (4) I'm not an expert at everything you read here. Some of it is me thinking out loud and learning as I go; please don't take it as gospel—strong opinions, weakly held.