Last year, more More than 20% of venture dollars went to fintech startups worldwide, according to CB Insights. Equally noteworthy, a third of all unicorns created in 2021 were fintech companies.
The Matrix Fintech Index 2021 reported that public fintech companies outperformed the market by 3x, driven largely by favorable IPO debuts, SPACs and greater adoption of digital payments and e-commerce, especially BNPL.
While those companies saw a decline of about 30% in the final months of the year, investors are eagerly looking for new opportunities: In the final accounts, VCs funded privately-owned fintech startups to the tune of $134 billion, Crunchbase found.
Now is a great time to launch a fintech startup, but which company is best to pitch if you are a nascent embedded finance company in Latin America? Who Should You Choose If You Are A Later B2B Payments Company In The US? To give TechCrunch+ readers specific knowledge about what fintech investors are currently looking for and what you need to understand before approaching them, we interviewed ten active investors over the past few weeks.
Spoiler alert: crypto has come up more than once and LatAm is hot, hot, hot when it comes to investor interest. Each respondent was kind enough to let us know how they would like to be pitched, and for the grin, someone shared an example of a cold email that worked†
Here’s who we polled:
- Anish Acharya, General Partner, Andreessen Horowitz (a16z)
- Christina Melas-Kyriazi, Partner at Bain Capital Ventures
- Ethan Choi, partner, Accel
- Pete Flint, General Partner, NFX
- Munish Varma, Managing Partner at SoftBank Investment Advisers
- Nigel Morris, managing partner, QED Investors
- Tyler Griffin, co-founder and managing partner at Financial Venture Studio
- Mark Fiorentino, Partner at Index Ventures
- Sheel Mohnot, General Partner, Better Tomorrow Ventures
Anish Acharya, general partner, a16z
Fintech startups received massive amounts of venture dollars in 2021. As a company that has been investing in the space for a while, what differences in the landscape did you see? Were deals much more competitive?
In general, there are two ways to look at fintech: the narrow view of the space is like a set of financial services delivered through technology, a much broader view is fintech as a new business model for any internet company. The latter opportunity is 10x greater than the former, and the infrastructure supporting this change could deliver some of the largest fintech companies yet to be built. We’ve only just started.
The domain is still technical enough that founders can derive more value from experience and expertise and where many generalist investment patterns may not hold. For example, exponential growth in consumer products is almost always a reason to invest, except in consumer loans, where giving money away always fits the product market and growth matters less than one’s ability to get paid back. So investors with real expertise, rather than those who may experience fintech FOMO, have the opportunity to pick and win more of the right deals.
What in particular in the fintech space gets you all excited? What do you think is overhyped?
I am convinced that the products will become the primitives of financial services – that the traditional financial products we conceive (banking, lending, insurance, payment) can now be integrated through a single line of code, giving founders the ability to create higher order and more interesting consumer experiences. Looking ahead, just offering a standalone product is no longer good enough; the most compelling value propositions will rethink and remix these primitives in unexpected ways.
What criteria do you use to decide which companies to invest in?
Successful founders in the financial services field have a rich history of understanding past patterns as a key competitive advantage. We care deeply about how authentic the founder is to the problem they’re solving and how much work they’ve done to understand the history of the domain – what’s worked, what hasn’t, and why their approach is different.
Which markets (in and/or outside the US) are you particularly attracted to as a company, and why?
Because we are rooted in Silicon Valley, we increasingly see it as a series of networks that exist to foster new thinking, rather than just a geography within which founders build. We see a lot of activity in nascent fintech ecosystems in LatAm.
In addition, many markets that were considered ‘small’ (such as my home country of Canada!) offer rich opportunities for fintech. For example, the LTVs are huge for categories like wealth management, where a founder can build a multi-billion dollar company with just a few million of the right clients.
If a startup wants to pitch you, what’s the best way?
Let’s talk! It’s the best part of my job. (Email preference.)
Christina Melas-Kyriazi, Partner, Bain Capital Ventures
Obviously, fintech startups received huge amounts of venture dollars in 2021. As a company that has been investing in the space for a while, what differences in the landscape did you see? Were deals much more competitive?