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How fintech startups can navigate the Series B funding gap



By Ivan Nikkhoo, Founder & Managing Partner of Navigate Ventures


Securing rounds of VC funding is a critical milestone for any fintech startup looking to turn innovative ideas into reality, fuel growth and create value.

While market conditions have tightened since 2022, early-stage capital is still available for backable teams and visionary disruptors who are trying to solve a big industry problem. There is also ample late stage capital variable once these companies are at scale. However, growth-stage fintech startups face challenges in securing funding and often underestimate the time required to get from the series A round to the growth round. This leads to a growing funding gap affecting the global fintech startup ecosystem.

So, why is growth-stage fundraising proving such a challenge for founders, and how can we prevent the capital gap from increasing further?


Underestimating the time to raise

Achieving the required metrics to raise a growth round is getting more difficult as investor demands have risen. And herein lies the problem. Most founders still mistakenly base their Series B plans on their Series A experience. The current average period between the series A and growth rounds is currently about 31 months. As most funding rounds are based on 20-24 month cycles, many of these companies end up funding themselves as they run out of capital and runway. This issue is further exacerbated by lack of venture debt due to failure of SVB, Signature Bank, among others, as well as the availability of growth capital outside of Silicon Valley.

Series B, however, is a different beast altogether. The first of the so-called ‘growth’ rounds, Series B raises are designed to turbocharge growth and expansion. The cheque sizes dwarf those made at Series A; hence, investor expectations are fundamentally different and have risen considerably as markets have tightened.

Growth investors look for specific metrics to determine the viability of a potential investment. First and foremost is the quality of the team. Then, demonstrating proven product market fit, repeatable sales model and a large and growing market. Once it is determined that these conditions are met, the focus will be on unit economics including burn, churn, average contract value (ACV), revenue growth and run-rate, customer acquisition cost (CAC) trends, and gross margin, all of which are relatively straightforward to demonstrate. There are also a number of newer, sector specific metrics that some investors look at as well.

Investors will then carefully scrutinise the business model, the total addressable market, the growth trajectory and the company’s ability to continue to acquire and maintain quality clients. In the case of fintech startups, they’ll also pay close attention to the wider regulatory landscape, cross-border operational challenges and the likelihood that these external factors could derail a startup’s growth trajectory.


Strong startups are running out of cash

Just 25% of startups make it to Series B, and even high-promise startups with strong fundamentals can face a lengthy journey to close their growth round, leaving competent founders who have hired good teams, achieved product/market fit and made smart strategic decisions struggling for runway and cash. This challenge is particularly pronounced in fintech, where founders are currently contending with a significant market correction following years of over-cooked valuations.

With the time between Series A and B the longest in 12 years, these founders face the huge challenge of striving for rapid growth and profitability while desperately trying to conserve cash. This near-impossible task often forces founders towards drastic cost-cutting. While measures such as reducing headcount or trimming product features can boost the balance sheet in the near term, there’s always the risk that they could damage the company’s longer-term health or stymie its overarching mission.

Ivan Nikkhoo

Eventually, founders may feel they have no choice but to move the goalposts for their raise, accepting a lower valuation of their business and giving up more equity to the incoming investors (which will also cause problems during future rounds) or approaching investors who may not be the best fit for the company and its strategic aims.


Additional capital without dilution

However, there’s one pathway through the funding gap that tends to go unexplored by founders – a Series A extension round.

An extension round allows a startup to raise a small round from its existing and specialised investors based on the same terms of the Series A to extend its runway and be more prepared for a proper growth round. This can be an attractive option for any founder who still enjoys the unwavering belief and support of their early-stage investors. These VCs don’t want to see promising young fintech companies go under, particularly if they’ve already demonstrated proven product/market fit and a repeatable sales model.

The challenge is that executing an extension round relies on the ready availability of this capital. There are many reasons why a willing VC may be unable to fund an extension round. Hence, it can be extremely difficult for fintech founders to secure the full amount they need for a Series A extension round from their existing VCs.

Fortunately, markets are good at finding novel solutions to emerging pain points. We’re now seeing a handful of VCs looking to specifically target extension rounds, between Seed and A, or A and growth rounds. Working in partnership with a startup’s existing investor, they work to plug the capital shortfall and create a solution that delivers value for all parties.

Post-Series A/pre-growth stage investors must be diligent and highly selective as their chosen investments must go on to raise Series B rounds at the expected higher valuation in a predetermined period of time in order for them to deliver the expected return and risk/reward profile. Nevertheless, their growing presence in the market creates a hitherto untapped opportunity for the founders of high-potential fintechs as they look to navigate the funding gap without compromising on their business plan.


Extension rounds must become an established part of the investment lifecycle

The most common reason for startup failure is running out of cash. With no sign that the difficult economic and market conditions are ending, ambitious fintech founders must adjust to the realities of the current climate and develop business plans that anticipate a much longer pathway towards growth stage funding.

At the same time, the global venture community needs to create more attractive options for fintech founders who need a bit more time and capital to get to Series B, rather than forcing them to cut costs or experience significant dilution. The Series A extension round offers a proven bridge across the funding gap – it’s time we spread the word.





Revolutionizing Risk: Innovative Derivatives to Support the Evolution of Commercial Space




By Grant Gryska, Co-Founder and Director of Markets at Allocation.Space


The space economy continues to expand rapidly, crossing $500bn in revenue in 2022, 78% of which came from the commercial sector[1]. Major developments like the successful test launch of SpaceX’s massive Starship are set to radically change the cost of getting mass to orbit, unlocking new possibilities for business in space.

This growing market presents outsized opportunities for investors, insurers, and businesses. But, as enterprises extend their reach beyond Earth’s atmosphere, risk management tools must evolve to meet the new and unique challenges they face. A new generation of derivative instruments is emerging to support the commercial space sector while complementing traditional insurance models.

A Paradigm Shift in Risk Management

Traditionally, space ventures were funded by governments and international space agencies — institutions that were able to absorb risk and ignore bottom-line concerns. The arrival of private space companies such as SpaceX, Vast, and Blue Origin represents a material shift in the trajectory of commercial space. National interest is no longer enough; space ventures must also turn a profit, which means managing risk. These enterprises are pushing the boundaries of what is possible, requiring a comparable evolution in financial tools to support their endeavors.

Grant Gryska

We’re now seeing a new generation of companies building platforms to host derivatives that enable enhanced risk management for the space industry. By hosting these products on a Swap Execution Facility (SEF), the aim is to bring pricing transparency and efficiency to the sector via a centralized venue. Unlike traditional insurance, which often relies on predefined policies and premiums designed to mitigate specific critical loss, swap contracts do not require proof of any actual loss or attribution, broadening the universe of potential participants in this growing market.

Derivative Instruments for Commercial Space

Derivative instruments tailored for the commercial space sector will help mitigate risks and enhance financial flexibility as the barriers to entry come down and competition increases.

  1. Space Weather Derivatives (SWDs): With satellite anomalies demonstrating a 74% correlation[2] with geomagnetic disturbances caused by the solar wind, these products will become invaluable in managing revenue loss due to these disruptions. SWDs will ensure a smoother execution of space missions and terrestrial applications such as power grid management.
  2. Space Derivative Contracts (SDCs): SDCs allow investors and companies to hedge against price fluctuations in space-related assets. Whether it’s fuel, space-based resources, or payload rate indexes across launch platforms and locations, these products provide a means to lock in prices, offering stability in an otherwise volatile market.
  3. Space Options (SOs): Like traditional financial options, SOs provide the right, but not the obligation, to buy or sell a space asset at a predetermined price and time. This allows investors to capitalize on favorable market conditions while limiting downside risk.
  4. Space Risk Swaps (SRS): SRSs enable entities to exchange or transfer specific risks associated with space activities. For instance, a satellite operator concerned about launch delay or orbital debris may enter an SRS with a risk-taking party, effectively transferring the risk to them. These products diversify risk and encourage collaboration among industry players providing complementary services like debris mitigation.

Complementing Traditional Insurance: Bridging the Coverage Gap

While traditional insurance remains a fundamental component of risk management, derivative instruments offer a more nuanced approach targeting the risks to revenue. These products provide a level of risk granularity that traditional insurance may lack or be unable to cover economically, which has left 99% of LEO (Low Earth Orbit), and 73% of MEO (Medium Earth Orbit) and GEO (Geostationary Orbit) satellites uninsured on orbit as of 2022[3]. This is crucial in an industry where risks to launch platforms, satellite technologies, and commercial objectives can be highly specific and variable.

The Future of Space and Derivative Instruments

There’s a growing cluster of companies looking to transform the financial products and venues supporting the commercialization of space. The derivative instruments being developed with the help of space industry players will provide a forward-looking and adaptive approach to risk management for space, complementing traditional insurance models.

As the commercial space sector continues its trajectory beyond Earth, these innovative financial tools will play a pivotal role in ensuring a robust and resilient financial ecosystem for companies participating in the space economy.



[2] Choi, H. S., J. Lee, K. S. Cho, Y. S. Kwak et al., 2011, Analysis of GEO spacecraft
anomalies: Space Weather relationships
, Space Weather, 9, S06001.


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2024 Payments Predictions




Alan Irwin, Vice President of Product & Solutions Europe, Global Payments:

Open banking in 2024 will be all about the consumer 

“2023 has been a huge year for open banking adoption, surging 68.2% from the previous year to hit 4.2 million users in the UK in July. Open banking enables consumers to provide third-party providers (TPPs) with secure access to their payments account, meaning that payments can be made through these TTPs directly from their payments account and without the need for cards.

“With more people using open banking for payments, in 2024 consumer expectations of open banking are likely to increase dramatically. Consumers will demand higher levels of speed, convenience, and security around open banking as a payment method. As a result, there will be a renewed focus on the availability and performance of APIs and user interfaces. Without improving these features, TTPs will see growth in open banking payments stagnate and even struggle to compete with digital wallets and standard cards.

“2024 will also see a stronger emphasis placed on consumer protection from fraud and scammers. With £239.2 million lost to authorised push payments (APP) fraud in the first six months of 2023, security is front of mind for businesses and their customer bases. A key differentiator for open banking and card payments is the liability protection offered by cards through the disputes and chargeback processes. Merchants and consumers alike want the power to protect themselves with tools and processes to limit financial exposure. As such, to grow in the coming year, TTPs will need to develop and implement enhanced risk and fraud prevention tools to help drive confidence in the payment channel and mitigate concerns around exposure.”

Competition between old and new banks will intensify around convenience

“Growth in consumers’ desire for a financial ‘super app’ experience will put a great deal of pressure on traditional financial institutions and increase competition between neobanks and legacy banks in 2024. A financial ‘super app’ is a single mobile application that can be used to manage all aspects of your financial life, including services that range across savings, investments, mortgages, and payments, for example.

“Neobanks, such as Revolut, are creeping into ‘super app’ territory: providing a range of services, from shopping discounts and savings pockets to instant currency conversions and stock investing, all on a single mobile application. So far, these developments are almost exclusively in the consumer banking space. However, in 2024 we will see the neobanks push their payments offerings further up the value chain into the B2B world, challenging traditional banks on another front.”

Ecommerce checkout enhancements

“In 2024, payments providers and their clients will place a fresh emphasis on customer experience, as demand for convenient and slick payment processes continues to increase. Currently, 69.57% of online shopping carts are abandoned and less than one fifth (17%) of retail, leisure and hospitality transactions are made through digital wallets, showing that much more needs to be done to offer smoother payment infrastructure online and in-store. As such, in 2024 businesses will focus on customer experience as a means of increasing customer loyalty and slashing cart abandonment rates in the process. Moving away from slow, clunky payment experiences to offer customers the ability to pay for something with a few clicks through biometrics, which allow customers to pay with a simple face or fingerprint scan, and digital wallets, which store customer payment information, is the primary method that businesses should be using as we approach the new year to tackle this issue.”

Data Storage and Keeping Customers On-Site

“Providing a top-quality payments experience will go hand-in-hand with ensuring that consumers feel safe at the checkout, especially with soaring cybercrime. In 2024 we’re likely to see more use of card data storage and tokenisation to further reduce cart abandonment rates as they allow consumers to store their card details for future use, making their next purchase at the ecommerce store much faster. Network tokens in particular, which are tokenised payment details saved for a specific card and merchant pair, drive higher approval rates for merchants and offer a more secure form of payment than raw card data entry. In addition to this, continuously updating customers’ card data further reduces friction in the checkout and drives better cart conversion.

“What’s more, customers are also put off payments when they are redirected to another (3rd party) site to complete it, as it is unfamiliar to the rest of the checkout process, often doesn’t carry the merchant brand and thus deemed insecure. Therefore, reducing site changes as much as possible and using clear branding and UX to ensure customers are aware that they’re still on this same site is key to instilling a sense of security. Similarly, real-time data validation built into the payment form can prevent bad data from being entered in the first place, such as invalid PAN, expiry date, or security code, as well as keeping out bad actors from spamming through card data en masse.”

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