Fintech startups have endured a challenging period as the economic downturn of the last several years has seen venture capitalists halt funding and become more selective in where they are placing monetary trust. 

However, challenging economic times often calls for innovation breakthroughs and that has put startups to the test by unearthing new and progressive financial solutions to not only attract capital investment, but also the sector out of challenging times. 

To discuss this in greater detail, Founder & CEO of Incore Invest, Nicolai Chamizo, shares his wealth of startup experience with Payment Expert and reveals the intricate relationship between startups and venture capitalists. 

Payment Expert: Firstly Nicolai, how much different is the tech startup sector from when you first ventured into it to now in 2024? 

Nicolai Chamizo: Over the last decade, the fintech startup sector has undergone significant transformation, driven by rapid technological advances, shifting consumer expectations, and evolving regulatory landscapes. 

Initially, fintech startups focused on niche markets, offering payment, lending, and personal finance solutions. However, as digital technology became more integrated into everyday life, these startups expanded their scope, embracing blockchain, artificial intelligence, and machine learning to innovate and disrupt traditional financial services.

Fintech has moved from the periphery to the mainstream, significantly altering how financial services are delivered and consumed, making them more accessible, efficient, and personalised than ever before.

PE: What have been some of the key elements in your experience of being able to get investors on board with some of your involvement in startup companies? 

NC: Successfully attracting investors to startup companies has hinged on a few critical elements. First and foremost, having a clear and compelling value proposition is essential; it’s important to succinctly communicate how your product or service solves a significant problem in a unique or superior way. Demonstrating a deep understanding of the market, including size, growth potential, and competitive landscape, has also been crucial. 

Investors are particularly drawn to startups with scalable business models and a clear path to profitability. Furthermore, having a strong, diverse, committed founding team with complementary skills and a track record of execution can significantly increase investor confidence. 

Finally, showing traction through early customer engagement, revenue, or strategic partnerships has been key in proving the concept and the market demand. These elements, combined with a well-prepared and persuasive pitch, have been instrumental in my experience with getting investors on board with startup companies.

credit: Shutterstock
credit: Shutterstock

PE: Can you explain the intricate process of complying with certain regulations and regulatory requirements and why it is so important for startups to learn this? 

NC: Navigating the complex landscape of regulations and regulatory requirements is a critical process for startups, serving as a cornerstone for sustainable growth and market legitimacy. 

This intricate process involves understanding and adhering to laws and guidelines set by various governing bodies, which can range from financial compliance and data protection, to labour laws and environmental regulations. 

The importance of this compliance cannot be overstated; it ensures startups operate within legal boundaries, protecting the company, its customers, and its investors from legal and financial risks. Moreover, compliance builds trust with customers and partners by demonstrating a commitment to ethical practices and standards.

Learning to manage regulatory requirements effectively is also a strategic advantage for startups, facilitating smoother entry into new markets and industries. It can also be a significant factor in attracting investment, as compliance reduces the company’s risk profile. 

Therefore, investing time and resources into understanding and implementing robust compliance frameworks is essential for startups aiming for long-term success and scalability.

PE: Why is product innovation from startups so crucial during a down economic period and what have some of the best examples of this over the last two years? 

NC: Product innovation from startups plays a pivotal role during economic downturns, catalysing recovery and growth. During these periods, traditional businesses often scale back on innovation due to budget constraints, creating opportunities for startups to fill the void and address emerging needs with agility and creativity. 

Startups, with their inherent flexibility and propensity for disruption, can quickly adapt to changing market demands, offering solutions that are not only cost-effective but also align with the new consumer behaviours and priorities that often emerge during economic challenges.

Several examples of such innovation have stood out in the past two years. Telehealth platforms have rapidly evolved, offering accessible healthcare services to those unable to visit medical facilities. E-commerce solutions have become more sophisticated, with startups developing enhanced online shopping experiences, including augmented reality features to try products virtually. 

In the financial sector, fintech startups have introduced digital banking and payment solutions that cater to the growing demand for contactless transactions. Additionally, edtech startups have revolutionised remote learning by providing interactive and personalised educational tools, accommodating the surge in online education.

These innovations meet immediate needs and lay the groundwork for long-term shifts in consumer behaviour and industry standards. By driving product innovation during economic downturns, startups survive challenging times and can emerge as leaders, reshaping industries and fueling economic recovery.

credit: Shutterstock

PE: Besides providing funding, what else can Venture Capitalists (VCs) do for a startup to ensure the best potential future of the company? 

NC: One of the key advantages they offer is strategic guidance. With their broad experience and deep industry knowledge, VCs can provide invaluable insights into business strategy, scaling operations, and navigating market challenges. They often help refine business models and identify growth opportunities the startup team might not have considered.

Moreover, VCs can facilitate access to a vast network of industry contacts, potential customers, partners, and even future employees. This networking opportunity can be crucial for startups looking to scale quickly and efficiently. They also assist in building credibility and trust in the market, which is vital for emerging companies seeking to establish themselves in competitive landscapes.

VCs are also instrumental in mentoring founders, offering leadership advice, and supporting the development of a strong company culture. This mentorship can be vital in steering the company through the ups and downs of startup life. 

In essence, while funding is critical, the support structure, mentorship, and network access that VCs provide can be equally, if not more, valuable in ensuring the long-term success and sustainability of a startup.

PE: Lastly, and thank you for your time Nicolai, what are some of the biggest opportunities and challenges facing startups from last year and into 2024? 

NC: Startups find themselves in a position with both opportunities and challenges. The rapid pace of digital transformation offers fertile ground for innovation in areas like remote work technologies, digital healthcare, and sustainable solutions. This period also sees startups at the forefront of addressing the urgent demand for sustainability, presenting a significant opportunity for growth in clean technology and eco-friendly practices.

Yet, these opportunities are countered by a set of formidable challenges. The competition is fiercer than ever, with startups competing among themselves and against established companies making digital inroads. 

Funding has become more selective, with a greater emphasis on profitability and sustainable growth. Navigating the evolving regulatory landscape, particularly in sectors like fintech and healthtech, adds another layer of complexity. 

Additionally, the battle for talent has intensified, with startups needing help to attract and retain individuals who can thrive in the high-pressure startup ecosystem.

In essence, the landscape into 2024 presents a dual narrative for startups: immense potential for those who can innovate and adapt, set against a backdrop of significant operational and strategic challenges. How startups navigate this balance will shape their success in the coming year.