What do Smart Investors Consider While Investing in Fintech Firms?

It’s no secret that fintech is a hot industry right now. Companies in the space are attracting investment at a rapid pace, and it can be tempting for investors to get on the bandwagon. However, before diving in headfirst, it’s important to take a step back and look at what makes a good fintech investment.

Why should we follow smart investors?

There are several reasons why following the lead of smart investors is a wise decision when it comes to fintech. First, they have the experience and knowledge necessary to assess a company’s potential. They also understand the sector well and can identify early trends that may be worth investing in. Additionally, they’re typically well-connected in the industry and can provide valuable insights into relevant companies and deals. By following the lead of smart investors, you can increase your chances of making successful fintech investments.

Why should we invest in Fintech firms?

There are a few reasons why we should invest in fintech firms.

1. First, fintech firms are revolutionizing the financial industry. They are making it easier for people to access financial services, and they are making it easier for businesses to manage their finances.
2. Second, fintech firms are profitable and growing rapidly.
3. Third, fintech firms are innovative and they have a lot of potential.
4. Fourth, fintech firms are well-funded and have a strong team of employees.
5. Fifth, fintech firms are compliant with regulations.
6. Sixth, fintech firms are well-positioned to take advantage of the global market.

So now let’s take a look at how smart investors analyze fintech companies. Because fintech startups are not like any other startup.

Look at the problem!

First, try to look at the problem that the fintech startup is trying to solve.

When assessing a fintech startup, it’s important to look at what problem the company is trying to solve. Some startups look at an existing problem and then design a solution around it. Whereas many startups create a solution and then look for a problem to fit it. The former approach is what smart investors look for, the latter approach is what is more common but ends up losing in the market.

A company that does not know what problem it is trying to solve, will also not have its strategy in place. It does not matter how good the user interface is or how scalable the company is. What matters is will the customers switch to it? and this will only happen when the startup gives the solution to an existing problem.

Examples of companies that looked at existing problems

1. Nude: This fintech startup focused on the home-buying budgeting experience. It allows users to set funding goals. It also offers saving funds with the ability to deposit savings and bonuses.
2. Fast P.A.Y.E: This fintech startup focuses on people who go through cashflow problems at the end of the month. This startup focuses on providing short term debt options and is aimed at people finding it difficult to make it.

If a fintech startup is still trying to figure out what problems it wants to solve, it’s probably not worth investing in quite yet.

Look at the value being created

Second. Ask whether the basic idea of the fintech startup you are looking at, adds any value to society or not? The problem with most fintech startups is that they try to recycle the same idea with minor tweaks. This is particularly relevant for the payment processing sector. There are a lot of startups in this sector that claim to use blockchain to provide the lowest rates etc. This is all good but investors need to see that if a startup is trying to enter a red ocean, it is not likely to survive because startups simply cannot beat the competition.

Investors should keep an eye out for startups that are focusing on blue oceans.

Look at the team

Third. Consider the team of people behind the startup. What kind of experience do they have? Which companies have they worked for? How big was their role in those companies? What did they learn from their time at those companies, and how will it help them with the new company?

If a fintech startup is solely made up of inexperienced employees, it’s probably not worth investing in. However, if the CEO has experience at a well-respected company and has an impressive track record, this is good news for investors.

Look at the knowledge base

Fourth. Assess how deep the knowledge of the market the team has. In the case of a fintech startup, it is important for investors to find out if the company has been able to understand how the market works and whether they have been able to come up with a solution that fills a need.

Scalability

Fifth. Check if the product is really scalable and can be easily adopted by a mass market.  It’s important that the startup has built something that is valuable and desirable for its target audience. If it has not taken the time to understand who they are targeting their product toward, this usually means bad news for investors.

Conclusion

It’s important for investors to look at many factors when deciding whether or not to invest in a fintech startup. In this article, we’ve taken an in-depth look at some of the most important considerations and provided tips on how you can use them as part of your own due diligence process. Although this checklist is by no means exhaustive, it should help you get started thinking about how smart investors consider their investments so that they can make sound decisions backed up with data.