So you have gone through pre-seed and/or seed funding? First off, we would like to congratulate you, that is a tremendous achievement!
You have had a taste of FinTech investment and you will probably already be thinking about the next funding round. Pre-seed/seed; check, but what is next? Taking chronological order into account, this would be Series A funding. What is Series A and how do I prepare for it? This article aims to answer that question and give you some tips on how to prepare for this crucial round of funding.
What is Series A FinTech Investment?
During the seed stage, your company has built a track record. You have built a user base, your company is generating a consistent revenue stream or hitting other Key Performance Indicators (KPIs). At this point, you may be considering going through a Series A funding round in order to scale your business further.
This tends to be the first funding stage where venture capital (VC) firms get involved. To gain access to a more substantial amount of money to grow your FinTech, company shares are sold to secure the required capital.
VCs play an important role in FinTech investment and their capital injection can significantly help companies scale their operations. Identifying the right VC firm to act as your sparring partner is crucial to growing your business. Here is a list of the top Series A investors in Europe.
It is important to acknowledge that investors are not only looking for a great idea but they want to see a business model that can be monetized and is profitable in the long run.
It’s raining…FinTech Investment
It is difficult to pinpoint an average amount of capital raised in a Series A funding round in the FinTech space as the industry is constantly evolving and rapidly growing. Due to this growth, the rise in popularity, and a significant increase in traction, companies receive higher valuations on a year-to-year basis.
For example, Berlin-based neobank N26 raised €10M in their Series A funding round back in 2015. Now, just six years down the line, their Amsterdam-based competitor, bunq, has raised €193M in their Series A FinTech investment round. Two FinTechs, both in the digital banking space, went through two significantly different Series A funding rounds in the span of six years. This is a testament to the jaw-dropping growth of the FinTech industry in the last years.
With this amount of money flowing into the industry, it is no doubt an exciting time to be a FinTech company. But how do you go from Seed to Series A and get a piece of the investment pie? Let’s take a look at some of the things to keep in mind to help you prepare.
Series A Checklist; FinTech Investment within reach
- Business plan; great ideas are terrific but at this stage, investors want to see how your idea can be monetized and how you plan to be profitable for the long term. How will you use their funding to grow the business? Hire talent? Expand product/service offering? Market expansion?
- Traction; make sure to show investors that there is demand for your business, think KPIs such as active users, traffic, or revenue. With their investment, they want to see your business propel forward. For a more visual take on the term traction, think about a graph with a hockey stick curve. When they invest in you and your FinTech, they want to see your business approaching the inflection point. They want to be invested before the curve shoots upwards
- Compelling narrative; Why your business? Why your product/service? The FinTech space is no longer an industry that is completely unsaturated, especially verticals like digital banking or payments. So what problem does your company aim to solve and what are you doing differently?
- FinTech investment deck; an essential presentational tool when showcasing your company’s story to investors. You want to use this to help get investors excited about your FinTech and product/service. Delivery is key, practice your pitch and make sure you have it down to a T
- Paperwork; you don’t want your capital injection to stall because of missing paperwork, have all the paperwork concerning your business ready to go i.e. corporate structure, client, and third-party contracts or legal documents. Investors will do their due diligence, make this easy for them by having everything prepared in advance
- Investors; build relationships early, before you are looking to raise money, ideally do this months beforehand. Identifying the right VC is crucial – Do they typically get involved in Series A? Is their focus on my industry/specific subsector? The geographical location (something to consider for relationship building)?
So you have gone through the checklist, covered all your bases, and are now looking to secure your FinTech investment. We’re definitely rooting for you. With investors onboard and new capital to fuel your growth plans, you are probably looking for FinTech talent. Look no further, we’re here to help.
Your Partner in Growth
As the FinTech industry continues to grow, so does the need for talent to facilitate this. At Storm2 we have specialized in connecting FinTech talent with disruptive FinTech players such as yourself. We are able to assist in any stage of your growth by connecting you with the right people. Please don’t hesitate to get in touch and we would be more than happy to see how we can help and support you in your journey.