Hotspots for investor support: What fintech CEOs are eyeing in the latter half of the year

With half the year behind us, what do fintech CEOs expect for the remainder of the year?

A recent report by Fin Capital shows that fintech CEOs are generally optimistic for the year’s second half. The investment firm sees a rise in investment volume and available funding, though they expect continued challenges with tighter deal terms, compressed multiples, and more stringent investor requirements. While the IPO market outlook is subdued, there is growing optimism regarding both inbound and outbound M&A activity. Regulatory issues are a significant concern, with crypto, open banking, and BNPL being the top topics for CEOs.

I spoke with Logan Allin, founder and managing partner at Fin Capital, about the key objectives fintech CEOs are setting for the upcoming months and their strategies for mitigating the effects of sustained high interest rates on fintech funding and valuations.

Q: What strategic goals are fintech CEOs focusing on in the coming months?

Logan Allin: Efficient growth is top-of-mind for CEOs, which means continuing to do more with less and target growth rates for VC-stage companies being 40% to 60%+ and for growth-stage companies being 20% to 30% while bringing profitability forward. Additionally, other topics we are hearing from CEOs and in board rooms: staying focused on product roadmap milestones, particularly in AI capabilities integration, customer success/deepening with a focus on 110%+ net-dollar retention metrics, and maintaining culture and team member retention and engagement in challenging times.

Q: What measures are fintech CEOs taking to: a) Mitigate the impact of rising interest rates, which make funding more difficult and reduce valuations? b) Sustain investor confidence?

Logan Allin: a) Rising interest rates were the second biggest challenge cited by CEOs in our survey results. However, the vast majority do expect 1-2 rate cuts before year-end, which looks more probable according to the Chicago Mercantile Exchange starting in September. CEOs who have overachieved operating plans and surpassed their ’20-’21 valuations on lower multiples (which remains a high bar) are in a position to raise a new round of priced financing at step-ups in valuations (top decile of private companies), but those that still need to improve top-line, gross margins, or other key metrics are raising “strategic SAFEs” (Simple Agreement for Future Equity) that are typically being priced by insiders that are flat or with modest forward-looking valuation caps. Further, all CEOs are cutting burn and growing more efficiently in order to extend cash runways and focusing on 1H 2025 for priced financings for the most part, in what everyone expects will be a far more attractive environment.

b) Sustaining investor confidence has been all about setting realistic operating plans, “beating and raising” and demonstrating that the business model is repeatable with attractive unit economics that is deserving of further growth capital. Additionally, CEOs have returned to “first principles” thinking with business fundamentals aligned to efficient growth vs. growth-at-all-costs that led to high and unsustainable burn rates. We are also seeing CEOs “over-communicating” and providing more frequent updates to investors, through platforms like Standard Metrics – improved and more detailed reporting leads to greater investor trust.

Q: The survey reveals that fintech CEOs are seeking the most support from their investors in the “Business Development” area. How can investors support fintech CEOs in this area?

Logan Allin: Investors can significantly enhance fintech CEOs’ business development efforts in several key ways:

• First, due to the high volume of inbound inquiries that prospects receive, cold outreach is becoming less effective. Startups often struggle with a limited market reputation, making it hard to gain access to decision-makers. However, prospects are more likely to consider a company backed by a highly regarded firm with a strong track record and deep industry expertise.
• Second, identifying economic buyers within larger enterprises can be challenging. Investors can help by identifying these key stakeholders and facilitating connections across the organization to get deals across the line and closed.
• Third, hiring for go-to-market (GTM) roles is a time-consuming process for companies of any size. Investors can streamline this by defining these roles, referring candidates, and developing compensation plans based on best practices observed across their portfolio and industry networks, backed by benchmarking data.
• Additionally, channel partners such as Managed Service Providers (MSPs), Global System Integrators (GSIs), and Cloud Service Providers (CSPs) often liaise exclusively through investors to facilitate co-development, marketplace listings, and joint marketing efforts. Investors can serve as an entry point and advisor in these GTM initiatives.
• Lastly, investors can help refine value proposition, pricing, and packaging based on both the commercial success and challenges they’ve witnessed across their other portfolio companies.