What opportunities do you foresee for fintech investors over the next 6 months or so? Some interesting things are taking place right now in financial markets. There’s an increasingly open banking environment, adoption of new technology by more mature players in this space, and a surge of companies that offer “cloud-based” financial services, especially those connecting established banks to non-bank customers to deliver financial services via the web. If you are an fintech investor, what are your opportunities for growth?
The first part of the six-pack is a venture capital investment. Venture capital investment is still somewhat taboo in fintech. Some people in the financial services space think of it as an investment in the futures of specific businesses. Fintech is still relatively new and many people believe it hasn’t had a large number of successful start-ups, but there are investors who are willing to take risks in it.
Another area of fintech investment is the early stage. If you can spot companies in their early stages, it’s an excellent opportunity to make a killing. An easy place to look is at accelerators, often called “acceleration firms.” Accelerators are firms that help finance start-ups, helping them to raise money from private investors before they get going. An accelerator can make a killing on a fintech investment early in its life, because there are few competitors in that space.
Private equity. This is another good area to look for fintech investment opportunities, particularly for larger companies. Private equity firms usually own a major chunk of a company, but only have to disclose their ownership percentages when asked for information about their investment decisions. They can use this veil of secrecy to extract high fees from the company, making it a poor area for small investors. However, there are some private equity funds that are managed by savvy and experienced venture capitalists, and they do make for good investments for the right people.
Peer-to-peer lending. When it comes to high risk investments, fintech often has a low barrier to entry because the entire process is digital. Peer to peer lending is one of the fastest growing sectors in the financial technology space, so it makes sense to look for opportunities here. Many companies in the biotech industry have an active venture capital program that uses private capital to provide investments to start-ups and smaller businesses.
Private investors. Lending in financial technology is a little different from traditional lending because the money is not actually made by the lender, but rather by the borrower. This allows private equity and venture capitalists to participate in this rapidly growing sector without having to worry about traditional business problems, such as getting personal loans. Most private equity firms are actually represented by attorneys that can provide valuable information on the investment opportunities available through various lending institutions.
Venture capital investment. Fintech investors can also tap into venture capital investment plans run by private equity firms. These programs tend to be more aggressive in terms of how they utilize their investment capital. Most venture capital investment firms do not really deal directly with fintech companies, but instead, look to support start-ups or invest in companies with highly successful business models.
Overall, there are several ways for fintech investors to get involved in this rapidly growing sector. The top ten investors in the world by far have shown the most consistent interest in supporting startups and new businesses. They all have unique ways of providing capital that is both helpful and aggressive in its approach to increasing the availability of new technologies and equipment for small businesses. Most are actively involved in at least a few startups in the process of providing seed funding. Whether they are providing seed funding or working directly with venture capital firms, these are some of the best ways to provide help for biotech start-ups.
