How can fintech startups survive the VC winter? • TechCrunch

The decade-long summer of free money is over. Venture funding fell $90 billion (53%) in the third quarter of 2022 from a year earlier and fell $40 billion (33%) compared to the second quarter, per Crunchbase data. That makes Q3 2022 the slowest quarter for VC funding since the start of the pandemic.

Despite all the crazy stories this year, however, there are real opportunities for ambitious fintech startups to become the new heroes of the multi-trillion dollar banking and embedded finance industry.

In particular, I hear that investors are reluctant to finance future potential unless it comes hand in hand with concrete customer attraction. So if you’re building a fintech idea and need funding today, it’s important to get the product into the hands of customers quickly.

How will you do it? By gathering feedback, using it to sharpen focus and prioritization and ultimately reward your customers for helping you.

Here are three tips to achieve these goals:

  1. Get feedback and insights from your customers with a working product.
  2. Aim high in the long term, but don’t work on anything other than minimum viable product (MVP) in the short term.
  3. Always remember the problems you are trying to fix for people and reward them for choosing you.

Gathering feedback and insights from your customers is critical

All things being equal, embedded banking startups and new fintechs will live and die on the basis of the user experience they provide.

In this operating environment, startups have a greater chance of impressing investors if they can show concrete results.

How does it look in reality? Prepare yourself for these common questions before heading to an investor meeting with your pitch deck:

  • Who are your users?
  • What are the problems you are trying to fix for them?
  • What do they like and what do they want?
  • Where will you meet them?

The only way to find those answers is to ship something real – a working product that people can interact with and use. That means everything you’re building right now should be in service of getting an MVP out the door.

I’m not saying, “Build it and they will come.” Too many tech companies are closing up shop because they created solutions in search of problems. It’s very easy to slow yourself down by thinking too far ahead 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? In my experience, it will take 10 to 20 engineers, about 18 months and millions of dollars, and they will probably end up building something that may never see the light of day.

Eighteen months is a very long time in an environment where fintechs and embedded banking startups can come to market in three months, if not faster, according to Bain & Co. research. Also, speed creates opportunity: The study expects embedded financial transactions in the US to grow to $7 trillion over the next four years, up from $2.6 trillion today.

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