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6 fintech investors sound off on AI, down rounds and what’s ahead on August 17, 2023 at 6:15 pm
At the height of the funding boom in 2021, no single sector enjoyed as much VC money as fintech startups did. But in 2023, it appears that fintech companies have to work harder to get funding.
Global funding in the space hit a six-year low in the second quarter, according to CB Insights. Specifically, following a spike in funding in the first quarter driven by Stripe’s outlier $6.5 billion round, global fintech funding declined 48% to $7.8 billion in Q2 2023.
Valuations have also taken a hit. With only a few exceptions, once-valuable fintech firms have seen their valuations drop significantly, based on secondary share activity as analyzed by Notice.co, which offers a pricing tool for the private markets.
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As such, it’s no surprise that artificial intelligence (AI) is a hot topic of conversation in the space, as companies work to incorporate it into their offerings — some more meaningfully than others — in an attempt to stand out.
“We’ve seen many of our portfolio companies adopt AI to increase efficiency, improve automation, and enable faster communication with their customers,” said Lizzie Guynn, a partner at TTV Capital.
But Hans Tung, a managing partner at GGV, warned that just because AI is the hot sector of the moment, investors should not invest in it blindly. “AI is . . . overhyped. AI is central to the core business in some companies, and in others it is simply a supporting character,” he said. “We value domain knowledge and information on how to best apply technical solutions to solve customer pain points, be it consumers or enterprises.”
Overall, navigating the venture landscape as a fintech startup in today’s market requires resilience, perseverance and a more responsible frame of thinking around growth. It’s clear that investors are taking more time to evaluate deals than they were during the funding boom.
Aditi Maliwal, a partner at Upfront Ventures, explained how investors in the space are thinking: “We’re able to take a little bit more time to get to an investment decision, as processes aren’t happening in 24 hours like they did at some point in 2020!”
To help TechCrunch+ readers understand what fintech investors are thinking these days, as well as what you should know before approaching them, we interviewed six active investors over the last couple of weeks. Plus, they were gracious enough to share some of the advice they’re giving to their portfolio companies.
We spoke with:
Mark Goldberg, partner, Index Ventures
Aditi Maliwal, partner, Upfront Ventures
Hans Tung, managing partner, GGV Capital
Lizzie Guynn, partner, TTV Capital
Ed Yip, partner, Norwest Venture Partners
Lauren Kolodny, co-founder and partner, Acrew Capital
Mark Goldberg, partner, Index Ventures
Everyone is talking about artificial intelligence. If a company isn’t already using it, they’re looking for ways to incorporate it into their operations. What is getting the thumbs-up and what’s not in the theme of the moment?
What’s been surprising to me about AI in fintech is how much of it seems to be under the hood (automating rote internal tasks) rather than facing externally (flashy new features). This means that many of the most AI-forward companies may not be the most obvious ones.
Over the years, we have seen many startups, especially neobanks, focusing on very niche segments of the population. What are your thoughts on such specific offerings? Is it a good strategy to be so specific and what do you need to do to be successful if so?
The biggest evolution in consumer finance in the last decade has been for people to see their banks as extensions of their own personal brand, like their clothes, car or music. So, it’s a great strategy and we’ll be surprised by the depth and loyalty of these “niche” communities.
Do you expect to see more down-rounds in 2023? Are you seeing more companies raising extensions or down-rounds compared to 2021 and 2022?
More down-rounds are coming. Supply and demand are still out of equilibrium, and I expect that will change as company balance sheets dwindle.
What are you most excited about in the fintech space? What do you feel might be overhyped? Is anything hyped at this point in the cycle?!
I think the fintech tourists are gone, and it takes real conviction in this market to build and invest. Banking today is harder than it should be, especially for the tens of millions of people who don’t have access to traditional financial services.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
There’s often one chart or slide that defines a pitch. Cut the noise (and the 30-slide deck) and focus on the one thing that matters most to your story.
Aditi Maliwal, partner, Upfront Ventures
Everyone is talking about artificial intelligence. If a company isn’t already using it, they’re looking for ways to incorporate it into their operations. What are your thoughts on this? What is getting the thumbs up and what’s not in the theme of the moment?
Every company will adopt AI as another technology that enhances their existing offering. I don’t think of investing in AI companies as any different from people saying in the mid-2000s that they were investing in the internet or investing in mobile. AI is now a new paradigm that everyone is going to adopt. We know that most companies have already been using data to make decisions, so now they are going to be using open source models to help make faster and more efficient decisions.
That said, a couple of categories are getting a lot of attention in and around the fintech ecosystem:
Copilot solutions for everyone in financial services: While I’m not sure a lot of them are getting funded, I still think the biggest companies will come after this category and provide solutions.
Creating synthetic users for fraud detection: This is a really big use case that can provide a lot of value. We basically have generative fraud at this point, so you need the right type of generative software to combat the constantly changing fraudulent activities/players.
Over the years, we have seen many startups, especially neobanks, focusing on very niche segments of the population. What are your thoughts on such specific offerings? Is it a good strategy to be so specific and what do you need to do to be successful if so?
To help TechCrunch+ readers understand what fintech investors are thinking these days, we interviewed six active investors over the last couple of weeks.
Business
The Cities Bracing for Trump’s Immigration Crackdown
In the wake of Donald Trump’s recent election victory and his promise of “the largest deportation operation in American history,” several major U.S. cities are bracing for potentially seismic shifts in their economic and social landscapes. As the nation grapples with the implications of this proposed policy, urban centers that have long been havens for immigrant communities find themselves at the epicenter of a looming storm.
Los Angeles, often dubbed the “City of Angels,” stands to lose more than its celestial nickname suggests. As a primary gateway for immigrants, the city’s vibrant tapestry of cultures and its economic engine could face significant disruption. From the bustling streets of Koreatown to the sun-drenched orchards of the Central Valley, the absence of undocumented workers could leave gaping holes in the city’s workforce and cultural identity.
Across the country, New York City, with its iconic skyline and melting pot reputation, faces its own reckoning. The Big Apple’s 5.9 million immigrants, many of whom are undocumented, form the backbone of industries ranging from construction to healthcare. The potential exodus could transform neighborhoods like Jackson Heights and Flushing, altering the very essence of what makes New York a global city.In the Sunshine State, Miami’s tropical allure belies the turbulent times ahead. Home to 2.5 million immigrants, the city’s economy relies heavily on sectors like tourism and hospitality – industries where undocumented workers often fill crucial roles. The potential deportation of these workers could send shockwaves through Miami’s economic ecosystem, from South Beach’s glitzy hotels to the agricultural heartlands of South Florida.
Chicago, the “City of Big Shoulders,” may find those shoulders significantly weakened. With 1.7 million immigrants in its metropolitan area, the Windy City’s diverse neighborhoods and industries face an uncertain future. From the meatpacking plants to the tech startups, Chicago’s economic resilience could be tested like never before.
In the Lone Star State, Houston and Dallas stand as twin testaments to the complexities of immigration policy. These Texas titans, each home to large immigrant populations, could see their booming economies stumble. The construction sites that dot their ever-expanding skylines and the service industries that keep these cities humming could face unprecedented labor shortages.
Out West, the San Francisco Bay Area’s reputation as a bastion of innovation and progress could be challenged. The region’s tech industry, often reliant on immigrant talent, might find itself grappling with a new reality. From Silicon Valley’s coding campuses to the agricultural expanses of the Central Valley, California’s economic powerhouse could face a reckoning. Phoenix, rising from the Sonoran Desert, could see its growth trajectory altered. As Arizona’s urban center, it stands at the forefront of the immigration debate, potentially facing not just economic impacts but social and political upheaval as well.
These cities, along with others like San Diego and Las Vegas, are not just facing potential economic disruptions. They are staring down the barrel of profound social change. Family separations, community fragmentation, and the erosion of cultural enclaves built over generations are all possible consequences of mass deportations. Moreover, the fiscal implications are staggering. Undocumented immigrants contribute billions in taxes annually, often without receiving the full benefits of their contributions. Their sudden absence could leave gaping holes in city budgets, potentially affecting public services and infrastructure projects.
As these urban centers brace for impact, the debate rages on. Supporters of stricter immigration policies argue for the need to enforce laws and protect American jobs. Critics warn of economic devastation and the unraveling of America’s urban fabric. What’s clear is that America’s cities stand at a crossroads. The coming months and years will likely reshape urban landscapes in ways both visible and invisible. From the foods we eat to the services we rely on, from the neighborhoods we call home to the very character of our cities, the impacts of this proposed immigration crackdown could be far-reaching and long-lasting. As the nation watches and waits, these cities – vibrant, diverse, and economically vital – find themselves on the front lines of a policy that could redefine what it means to be an American city in the 21st century.
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Business
How Trump’s Deportation Plans Could Reshape Major Cities
In the wake of Donald Trump’s recent election victory, his ambitious plans for mass deportations have thrust America’s urban centers into the spotlight. As the nation grapples with the potential implications of what Trump calls “the largest deportation operation in American history,” cities across the country are bracing for significant changes that could reshape their economic, social, and cultural landscapes.
The stakes are particularly high for metropolitan areas like New York, Los Angeles, Houston, Dallas, and Miami, which host the largest populations of unauthorized immigrants. These cities, along with other major urban hubs such as Chicago, Washington D.C., and San Francisco, stand at the forefront of a looming transformation that could reverberate throughout the nation.
Economic Tremors
Economists warn that the proposed deportations could send shockwaves through urban economies. Mark Zandi, chief economist at Moody’s, cautions that businesses would face “significant challenges” if a substantial number of immigrants were removed. Industries such as construction, hospitality, and healthcare—pillars of urban economies—could face severe labor shortages.
Joe Brusuelas, chief economist at RSM, emphasizes the potential ripple effects: “The native-born workforce cannot meet current labor demands.” This labor gap could lead to increased wages, potentially rekindling inflation—a concern that looms large over city planners and policymakers alike.
Community Fabric Under Strain
Beyond economic considerations, the social fabric of cities hangs in the balance. Elena, a Nicaraguan immigrant in Houston, voices a fear echoed in immigrant communities across the nation: “I’m scared… This is my home.” The threat of family separations, particularly in mixed-status households, casts a long shadow over urban neighborhoods.
Immigrant advocacy groups like FIEL are mobilizing, advising clients to prepare for “anything that can happen.” This atmosphere of uncertainty could lead to decreased community engagement and cooperation with local authorities, potentially impacting public safety and community cohesion.
Cities at a Crossroads
As the debate intensifies, cities find themselves at a crossroads. Some, like New York and Los Angeles, have historically positioned themselves as “sanctuary cities,” often at odds with federal immigration enforcement. The impending clash between federal policy and local governance promises to be a defining feature of this new political landscape.
Meanwhile, the logistical challenges of implementing such a massive deportation operation remain daunting. Questions abound regarding detention facilities, transportation networks, and the sheer manpower required to carry out Trump’s vision.
Looking Ahead
As America’s urban centers brace for potential change, the full impact of Trump’s deportation plans remains to be seen. Legal challenges are all but certain, and the resilience of America’s cities will be put to the test.
What is clear is that the coming months and years will be pivotal for urban America. As Jason Miller, a senior Trump adviser, puts it, the plan is to “immediately reinstate” immigration policies from Trump’s first term. For America’s cities, this could mean a period of unprecedented change, challenge, and, potentially, transformation.
As the nation watches and waits, the story of America’s cities in the face of this ambitious deportation plan is just beginning to unfold. The outcome will undoubtedly shape the future of urban life in America for years to come.
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Business
Donald Trump Wins 2024 USA Election
Based on the election results, Donald Trump has indeed won the 2024 U.S. presidential election, defeating Vice President Kamala Harris. Here’s an analysis of the key statistics and implications:
Electoral College Victory
Donald Trump has secured the presidency by winning crucial battleground states and flipping some key states that were previously held by Democrats. The final Electoral College tally is still being determined, but Trump has surpassed the 270 electoral votes needed to win.
Battleground State Performance
Trump’s victory was largely secured by winning several critical swing states:
- Wisconsin: Trump’s win here was pivotal in securing his path to victory.
- Pennsylvania: This state flipped back to Republican control.
- Georgia: Another key state that Trump managed to win back.
- Michigan: Trump successfully flipped this traditionally Democratic stronghold.
Popular Vote and Voter Priorities
While the final popular vote tally is still being calculated, exit polls provide insight into voter priorities:
- Economy and democracy were top concerns for voters.
- Abortion and immigration also played significant roles in voter decision-making.
Congressional Control
The election results extend beyond the presidency:
- Republicans are set to take back the Senate majority, securing at least 51 seats.
- Control of the House of Representatives remains undetermined.
Media Implications
The outcome of this election could be seen as a challenge to mainstream media narratives for several reasons:
- Polling Discrepancies: Many pre-election polls suggested a tight race or even a slight Harris advantage in key states. Trump’s victory, particularly in battleground states, may indicate that polls underestimated his support.
- Narrative Shifts: Throughout the campaign, much of the mainstream media focused on Trump’s legal challenges and controversies. His victory suggests that these issues may not have resonated with voters as much as economic and policy concerns.
- Voter Priorities: The emphasis on issues like the economy and immigration in voter decision-making may indicate a disconnect between media focus and voter concerns.
- Electoral Predictions: Many mainstream outlets were cautious about predicting a Trump victory, even as results began to favor him. This hesitancy could be seen as a reflection of broader media skepticism about Trump’s chances.
- Underestimation of Trump’s Base: The results suggest that Trump’s core support remained strong and potentially grew, despite negative coverage in much of the mainstream media.
It’s important to note that while the election outcome may challenge some media narratives, it doesn’t necessarily invalidate all mainstream reporting. The complex factors influencing voter behavior and the challenges of accurate political forecasting remain subjects of ongoing analysis and debate.
As the dust settles on this historic election, both the media and political analysts will likely engage in extensive reflection on the factors that led to Trump’s victory and the implications for future political coverage and analysis.
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