It was certainly a long year for those in the fintech world.
VC funding into global FinTech startups dropped by 49% in the first half of 2023 and by 36% in the third quarter, according to S&P Global Market Intelligence data. That funding dip created new challenges for fintechs across the Southeast, said Robert Daniel, FinTech Catalyst for Georgia’s technology business incubator ATDC.
“We are also seeing a very crowded market for FinTech software, many vying for the same customers and dollars. This means pilots and sales conversions can take longer than expected,” Daniel told Hypepotamus. “Everything is taking longer these days.”
Despite the national outlook, several fintech-focused VC firms across the Southeast recorded impressive numbers this year. Atlanta-based VC firm TTV Capital closed an oversubscribed $250 million round in March of 2023. And FINTOP Capital, in Nashville told Hypepotamus that they saw strong deal flow over 2023, with the team making six investments into seed through Series B startup.
There were also bright spots for payments and digital lending fintechs. And Daniel said that InsurTech was a surprise breakout category, making those startups ones to watch as we head into 2024.
Trends Of The Year
Scrappy founders were the name of the game this year. Jared Winegrad, Partner at FINTOP, said that the team “saw great operators raising leaner rounds with more realistic growth goals” over the last year.
“After the regional banking crisis, deposits and liquidity management became one of the biggest topics of the past year,” Winegrad told Hypepotamus. “We made a number of investments in tech that can help banks manage their balance sheet to prevent another similar crisis. We also saw a regulatory crackdown on Banking as a Service solutions in which the bank stays too far removed from the end customer. Middleware providers beware. And finally, GenAI began to work its way into the enterprise.”
Across the fintech landscape, Daniel said that this year was all about startups finding traction.
“That word means everything – customers, revenue, and investability. It is critical if you are at the pilot stage and much needed even at a later stage right now as funding has gotten tighter,” Daniel told Hypepotamus. “In a world where it is harder to fundraise to grow, you must find more efficient ways to acquire your customers and evolve your product fast enough to keep them.”
A Look Ahead
For Winegrad, there are plenty of reasons to remain optimistic about the sector as we head into 2024.
“Like the broader venture-backed ecosystem, fintech has experienced its ups & downs. 2023 was a difficult year to sell to enterprise customers, and the decline in available funding has shifted startup priorities from growth to profitability,” he added. “However, the majority of the FinTech industry lives not in volatile spaces like consumer lending, but in the infrastructure that enables the movement, lending, and security of cash and other assets. These are must-have, and aren’t going anywhere.”
