Last week, representatives from over 2,000 companies attended The Fintech Meetup in Miami. What’s special about the event is that it isn’t a typical startup conference. The centerpiece is two days of back-to-back 15-minute meetings with startups, investors and other ecosystem players.
Reflecting on over twenty meetings and a few conversations with friends, I wanted to share the following observations.
VC Is Actively Deploying Again
Despite a tougher funding environment in recent years, the mood was positive.
All of the major fintech investors with whom I regularly coinvest were there. Over the last year, a number of new venture capital firms have emerged as well, including Thomson Reuters, ResilienceVC, Portal Ventures, among others. Absent over the last few years were the generalist investors. Perhaps more anecdotal, but they seemed to be starting to return.
But VCs were asking different questions. Entrepreneurs came ready to discuss unit economics, and field real questions about their cash efficiency, topics that would not even have entered the 2021 lexicon. Multiple pitches I heard started with the words “profitable”.
As readers of this column know, this is music to my ears – I love “camel” startups. Among early-stage startups, many explained the possibility of “seed strapping” strapping”—essentially being able to scale the business with a single round of funding, largely because of advances in AI. This one-and-done approach is of course not for everyone (and not achievable for many), but it was a topic I heard a few times. Either way, founders are thinking more about capital efficiency.
Some Sectors Are Clearly Breaking Out
Since covering Money2020 a few months ago, two sectors have continued clearly as core fintech trends.
AI: The Industry’s Next Frontier
There were all manner of AI startups: credit scoring, fraud detection, underwriting, customer service, and personalized finance. The debate is shifting from “if” AI will change fintech to “how” and “who benefits.”
At the same type, there is meaningful hype in the space. Financial institutions and startups alike are looking for real-world applications. Some companies are rapidly scaling their revenue and providing real value. Yet, that won’t necessarily mean they will be enduring businesses, as OpenAI and other hyperscalers regularly expand their offering.
Investors, startups and corporates alike are looking for an answer here. To me, ultimately it will be about providing customer value. As Tim Hong, Chief Product Officer of MoneyLion told me: “As AI reshapes financial services, the biggest winners will be consumers and the businesses that prioritize delivering personalized, value-driven experiences. Consumers now expect seamless, tailored financial experiences, just as they do in travel (think Expedia) or e-commerce (such as Amazon). This is where AI steps in.”
Stablecoins Gaining Mainstream Traction
Stablecoins seem to be emerging as the killer app for crypto. Adoption over the last two years has skyrocketed.
Two specific shifts are occuring. Regulatory clarity seems to be emerging in many markets. Exits are also being demonstrated, notably with Bridge’s acquisition for over $1b by Stripe.
As a result, a whole set of ecosystem infrastructure is being built. This includes clear needs like money transfer, orchestration, and conversion, but also a number of applications built on-top of stable coins: dollarized bank accounts, payroll and remittances for example. Other use cases as well that I had not expected, as Michael Blaugrund, CEO of DriveWealth told me:” Stablecoins, if fully backed and transparently audited, represent a valuable opportunity for reducing risk and improving timeliness of funding for securities settlement, particularly for international firms with T+1 U.S. obligations.” Stablecoins are also seeing particular resonance in markets outside Silicon Valley.
How fintechs will navigate compliance and partnerships with traditional institutions remains an open question.
New Ideas Will Find Greater Resonance
One VC remarked to me that “many of the cards have been played, and a lot of innovation is derivative” Copycat investments in the same country – the next neobank, or lender – without a clear differentiated product, or go-to-market is poised for challenge because of VC fatigue, and the reality of unit economics at scale.
Companies that raised at sky-high multiples in 2021 are still struggling to reconcile valuation expectations with market realities. “Zombie” unicorns who are still alive, but unable to raise, and stagnating on growth. Down rounds, structured deals, and secondary sales are expected.
Per my point above on camels, fintechs that depend on heavy infrastructure, lending capital, or extended cash burn are under pressure. Even as VCs are deploying, capital-intensive businesses are at a disadvantage compared to leaner models.
Shriram Bhashyam, who is COO of Sydecar, an SPV provider, echoed this shift: “There’s definitely been a shift among startup founder and executive discussions. Before, headcount was a traction metric, a sign of company progress. It’s now starting to flip to headcount efficiency – ARR-to-FTE.” –
Anecdotally, I met no full-stack lenders or banks this year. Alternative funding sources—corporate partnerships, revenue-based financing, and debt—are becoming more attractive, especially as the VC market recovers.
Looking forward
In conclusion, fintech seems to be on the upswing. The mood is certainly positive with high crypto prices, expected IPOs and massive public market stock price rebounds. But at the same time, the market is more selective.
Ultimately, next year will be defined by AI integration, payments innovation, regulatory clarity, and capital efficiency.
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