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Going beyond capital to create value in the FinTech - Investor relationship

The last 10 years have seen the FinTech deals market grow rapidly in terms of both the volume and value of deals being made (this is also true of larger financial technology deals). This increased Investor appetite has raised the bar for those with capital to demonstrate the non-monetary value they can bring, while FinTechs have faced greater scrutiny and more rigorous assessment.

The mutual creation of sustainable value and growth is at the heart of today’s FinTech - Investor relationships, and with our expectation that the market will only accelerate as the recovery from COVID-19 continues, understanding how to navigate these relationships is key. So what are the characteristics of successful FinTech - Investor relationships that unlock sustainable value and growth?

We were delighted to host panelists from across the industry to explore this topic as part of UK FinTech Week. In this article, the third in the series exploring insights from our four FinTech Week events, we are pleased to share the key themes below.

Know your bounds

For any FinTech, being clear about the bounds of their core business is a critical place to start before considering investment. Three key behaviours for creating value include:

  • understanding their strengths and where they are a leader in the market;
  • avoiding focusing time and effort on areas that are on the fringe or adjacent to this core offering; and
  • exploring partnerships with other ecosystem players – including clients and best-in-class adjacents – that will enable growth into non-core areas if desired.

Alongside these behaviours, a number of key characteristics that create value include: a solution that solves a real client issue; a clear product roadmap; a professionalised business (e.g. with sophisticated client management and marketing automation); strong product delivery; infrastructure to support implementation; and successfully working through partners to build scale and acquire customers.

Leverage experience and networks

While acknowledging their bounds, FinTechs should also look to leverage the experience of their shareholders and investors. These critical players are likely to have invested in numerous companies over many years, and have a wealth of experience to share with those companies they invest in.

Three areas of particular opportunity that can unlock significant value include:

  • providing access to best practice;
  • sharing insights from prior experience across a broad range of companies e.g. for expanding sales functions to unlock scale; and
  • facilitating strategic partnerships, making connections across and beyond their portfolios to enhance value for multiple parties.

Blending individual experiences into this wider body of knowledge expands the possibilities for value creation.

Align on vision

Alignment of vision and outcomes is fundamental to any successful FinTech - Investor relationship, but not just in terms of the proposition or product. Within the planning and strategising, it is critical not to lose sight of the people who will be central to the success of both the transaction and the businesses’ future.

Building a shared vision of the value that will be created through the transaction and bringing this to the conversation early in the process can help build the necessary buy-in and support from the teams to make the deal a success. Having a shared vision including for future ways of working unlocks a drive and discipline that ensures sustainable value and growth in the long run.

Partner for the future

Successful FinTech deals are about more than the transactions themselves – they are about building a partnership between the FinTech and Investor that delivers sustainable value over the long run. Investors are drawn to good people as much as they invest in a good business, and building a partnership founded on transparency and flexibility can realise value over many years.

Key to this is having alignment from the start, and shared recognition of the value each party brings. Investing in the relationship and sharing the growth journey together keeps these front of mind.

The next and final installment in this series of articles will pick up on the theme of alignment and the importance of mutual value, as it explores the opportunities of scaling FinTechs for success through partnerships and collaboration.

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Andrew Macnab

Andrew Macnab

UK FinTech Deals lead, PwC United Kingdom

Tel: +44 (0)7979 600 615

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