28 September 2023 |

Next Big Unicorns


What’s Up In Fintech

On Thursdays, I share news stories and trending pieces I’m keeping tabs on. Consider it your shortcut to shifting through the noise in the fintech news world.

#1 Why US Latino Fintech Businesses Will Create the Next Big Unicorns 

Fintech must recognize the growing importance of US Latinos in the industry. With one in four startups founded by individuals of Latino descent, it’s no surprise that this community has caught the eye of major investors. Laura Moreno Lucas, a partner at L’attitude Ventures, sheds light on the transformative potential of this trend.

Lucas, formerly the Managing Director of the Nasdaq Stock Exchange, has a unique perspective on the underrepresentation of Latinos and people of color in the tech world. Her experience leading high-profile IPOs for companies like Lyft and Airbnb highlighted the stark need for more diversity in the sector.

Latino-owned businesses represent a colossal yet overlooked opportunity in the US economy. If these businesses were funded equitably compared to their non-Latino white-owned counterparts, they could generate trillions of additional revenue. To put it in perspective, US Latinos collectively wielded a $3.2 trillion economic output in 2021, ranking as the world’s fifth-largest economy, outpacing the UK, India, and France.

The existing funding structures, however, systematically underfund Latino-owned businesses. Research indicates that less than 1% of funds from top venture capitalists and private equity investors flow to these businesses, forcing them to enroll twice as many investors as white-owned businesses to secure equivalent funding.

The disparity becomes most evident when Latino-owned businesses approach the $1 million revenue mark, grappling with profitability and cash flow issues that hinder scaling. Yet, those that break through this barrier and reach $5 million in revenue grow at nearly double the rate of their white-owned counterparts.

Recognizing the need for early-stage capital, Lucas joined L’Attitude Ventures, which closed its first institutional fund last year, raising over $100 million from major financial institutions like JPMorgan and Bank of America. The fund primarily targets early-stage companies led by US-based Latino entrepreneurs, with a strong focus on fintech and other tech sectors.

Why It Matters:

Lucas’ mission extends beyond financial support; she aims to empower her community by facilitating access to financial tools and resources. Her experiences as a two-time founder and immigrant from Mexico give her a deep understanding of the challenges Latino business owners face.

By backing fintech companies like Listo, Flow, and Camino Financial, among others, L’Attitude Ventures, under Lucas’ leadership, is ushering in a new era of diversity in fintech. The injection of capital into the hands of diverse founders not only fosters innovation but also sets them on a path to sustainable success throughout the lifecycle of their startups.

The power of US Latinos in fintech represents an opportunity to reshape the industry and drive economic growth. It matters because it empowers a community, addresses systemic inequalities, and unlocks the full potential of diverse entrepreneurs who can contribute significantly to the economy. 

Lucas and L’Attitude Ventures are leading the way, demonstrating that diversity and inclusion are not just buzzwords but fundamental principles for a thriving fintech future.

#2 Angel Investors Boosting Investment In Female Fintech Founders

In 2022, a remarkable shift occurred in the world of angel investing. According to the Center for Venture Research, women angels made up 39.5% of the angel market, marking a significant increase from the previous year. This surge in female angel investors is paralleled by a rise in women-owned ventures seeking angel capital, accounting for 37.1% of entrepreneurs in 2022, up from 28.6% in 2021.

This trend is not only encouraging but also vital for female fintech founders. The data reveals a rising yield rate of 25.6% for women entrepreneurs seeking angel capital, up from 19.7% in 2021. Furthermore, minority angels and minority-owned firms also saw increased participation, with a yield rate of 33.1%.

Total angel investments reached $22.3 billion in 2022, despite a decrease from the previous year. Still, the importance lies in the growing presence of female angels and their impact on closing the investment gender gap.

For female entrepreneurs seeking angel investment, there are actionable steps to increase their chances of success. A solid business plan, a compelling narrative, and networking within and beyond their industry are key elements. Joining angel investor groups dedicated to supporting women-led startups, such as Golden Seeds, can also provide valuable connections and resources.

In the face of the persisting venture capital funding gap, the rise of female angel investors offers a promising path for women entrepreneurs. By leveraging strategic approaches and fostering connections, women can access the funding they need to launch and nurture successful fintech startups. As more women enter the entrepreneurial arena and shatter barriers, we anticipate sustained growth and success for women-led fintech ventures across all industries.

Why It Matters:

The surge in female angel investors and their growing impact on female fintech founders is not just a statistic; it’s a game-changer in the world of entrepreneurship and venture capital. Why does it matter? The answer lies in the glaring disparities that persist in the startup and investment landscape.

We all know it – less than 2% of venture capital funding goes to female-founded startups, an alarming statistic that highlights a glaring gender imbalance in the investment ecosystem. Female entrepreneurs face systemic challenges in accessing the capital necessary to turn their innovative fintech ideas into reality. The rise of female angel investors represents a powerful counterforce to this imbalance, offering a lifeline to women-led fintech startups that might otherwise struggle to secure funding.

The lack of diversity in venture capital is another pressing concern. A predominantly male-dominated industry often lacks the perspective needed to fully appreciate the potential of female-led ventures. Female angel investors bring not only capital but also diverse experiences, insights, and networks to the table. This diversity enriches the decision-making process and increases the likelihood of recognizing and supporting promising female fintech founders.

Beyond addressing gender and diversity disparities, the rise of female angel investors holds significant economic implications. It fuels innovation and drives economic growth by providing the funding required for fintech solutions to flourish. As more women gain access to investment opportunities and entrepreneurship, we can expect a ripple effect, resulting in the creation of more jobs, increased competitiveness, and a more robust economy overall.

As the momentum continues, we can look forward to a future where female-led fintech startups thrive, breaking down barriers and reshaping the financial technology landscape for the better.

#3 Reclaiming Fintech’s Value 

In a thought-provoking article on TechCrunch, Yuval Brisker, the CEO and co-founder of Alviere, an embedded finance company, delves into the potential of fintech amidst a turbulent year for the industry.

Brisker emphasizes that fintech can address critical global challenges like capital aggregation, financial inclusion, social mobility, and economic system stability. 

However, he highlights the need for fintech leaders to realign with their core values and rebuild trust in the wake of recent industry controversies like the blowout following FTX, Robinhood, and the GameStop short squeeze, and most recently, as he put it, “the ultimate irony” of Silicon Valley Bank. 

“Once admired for having successfully backed over 70% of all fintech IPOs between 2020 and 2022, fell prey to America’s first-ever fintech-enabled bank run,” he wrote. 

Why It Matters: 

Brisker identifies several key areas where fintech can make a meaningful impact. 

He emphasizes the importance of financial education, advocating for hybrid fintech/edtech models that equip individuals with better financial literacy and incentivize learning.

He also urges the fintech industry to address the financial stress experienced by workers, particularly in the face of inflation and rising living costs (I couldn’t agree more)! 

Fintech-driven HR systems and financial management tools can enhance employees’ well-being and mitigate the challenges posed by traditional banking services.

Brisker asserts that fintech has the potential to create positive change and improve lives by staying true to its core values. By focusing on empowerment, education, and alleviating financial stress, fintech can contribute to a more inclusive and stable financial ecosystem.