By Sergei Mosunov
Aug 29, 2022
Pitching To Investors: Three Best Practices For Fintech Founders
Fundraising is integral to a startup’s development. Founders need to earn investors’ trust by providing all the possible traction, but with the ongoing economic slowdowns and intensifying competition, venture capitalists are becoming more and more cautious in their decisions. I know it very well from my own experience with fundraising for the financial technology startup I cofounded.
In finance, the competitive environment is significant. On one hand, it is the red ocean where the entire accounting of money in the form of a balance sheet was invented hundreds of years ago; on the other hand, I believe the last major innovation took place with the advent of the first automated transaction systems.
But from my perspective, there is great potential for change in the financial sector. For example, the use of neobanks in the U.S. has grown, and today, there are nearly 30 million digital-only bank account holders in the U.S., according to Insider Intelligence. Another example is the stock market. It’s experienced dropsthis year. But, based on my observations, banks seem stable, which speaks of the accumulated strength and stability of this sector of the economy.
But how do you win over the competition if you’re trying to launch a startup in the finance space and appeal to investors? There are no easy answers.
In these circumstances, a fintech founder should be more convincing in communication with potential investors to get funding. Here are a few things you need to pay attention to in order to pitch your startup to venture capitalists with a favorable outcome.
1. Killer Features Or Hooks
Ensure your company can offer something different compared to similar competitor models. For example, my company provides early wage access, which is a feature, or “hook,” that helps us differentiate ourselves from others on the market. Such features are needed to create the product market fit that all startups dream of and all venture investors are looking for.
Keep in mind that when you have a hook, you need to be able to explain it to venture capitalists briefly but precisely. They know the value of a killer feature; your task is to show that you know what you are talking about. One way you can do this is by demonstrating that you’ve done your research.

They know the value of a killer feature; your task is to show that you know what you are talking about

2. Unit Economics
After identifying your startup’s competitive advantages, identify and evaluate its unit economics and the company’s potential for significant economic achievements in the form of profit when it scales. Investors, especially in the early stages, are always trying to assess what will happen to a project in the future and what kind of economy awaits it.
During this analysis, founders and investors might learn that rapid growth is only possible at the very beginning when early customers want such a product, but the company doesn’t have much long-term potential. Or, they might learn that with further growth, the cost of a client will be much higher in operational form. That’s often why many early startups can’t overcome the “death valley” curve. In my experience, early investors might try to evaluate startups as private equity. This helps them see the real estimate the project might have if it can’t grow quickly and remains with a limited client base.
3. Metrics
After defining your unique features and unit economics, you need to make investors believe that you are the one who can build a company worth investing in. You need to be thoughtful about how you present your startup and what you say in that presentation. Your pitch must be well-calibrated.
I learned from Scott Kupor’s book Secrets of Sand Hill Road that startup money is needed for derisking the business and growth. From my perspective, company valuation depends on whether you can reduce the very risks I described above. By showing killer features, unit economics and metrics to investors, founders can prove their understanding of the market and their ability to lead the company to success and overcome difficulties that might occur in the process.
In my experience, while examining new startups, investors will be looking for the features they’ve already seen in the companies that worked well for them in the past. Thus, founders should research portfolios of investors and venture funds in order to understand whether their startup has any similarities with those companies and use it in their pitch.
Everything in consumer finance is based on funnels, such as marketing, sales, risk, etc. Investors know about these funnels and pay attention to the way founders present them. So-called neobanks, for example, might be guided by indicators related to monthly active users and daily active users, as the entire profitability of the company is based on the client’s involvement and their actions. So, any investor will look at the ratio of sleeping to active clients and compare them with benchmarks and their own understanding of the industry.
Every metric, or funnel, should give a clear description of the client path and how this path works or needs to be improved. Banks also have lead magnets (i.e., hooks), downside/upside and so on. Investors very often sit down and sort out the business funnel of sales and customer acquisition.
Today, the main problem is that the markets are shrinking, and the evaluation of any startup is based on many things, such as the competitive environment and the ability of a startup to find the right features that can attract and retain a client. Founders should sort these things out if they want to sound reliable to investors.
Wale is an intelligent data & analytics platform for VC/PE investors
Copyright Wale 2023 / Privacy / Terms and Conditions / Cookie Settings