My 6 predictions for Fintech in 2023

The bet is over. Fintech is dead. At least that’s what the headlines suggest. In reality, it’s never been a more exciting time, especially for early-stage entrepreneurs. Fintech’s are just getting started. So here are my predictions:

#1 – 2023 will be a record year for companies started by repeat fintech founders: this prediction is obvious and incredibly important. How many repeat fintech founders were there in 2010? Trick question! Fintech wasn’t even a term until around 2014. Today, there are hundreds and hundreds of repeat founders who know more about the fintech ecosystem than ever before and are uniquely equipped to start category-defining companies. They know what to build, how to build it and who to hire. Given that digital penetration in financial services is still in the single digits, that’s a fantastic recipe for success.

#2 – 2023 will be the best year ever for pre-seed and seedstage companies to hire top talent: Until the middle of 2022, everyone is hiring. FAANG / MAMAA and 1000 unicorns absorbed huge amounts of talent. Then inflation hit, the Fed raised interest rates and ended the era of free money. Layoffs or layoffs affect almost everyone. The silver lining—If you’re a pre-seed or seed stage company, hiring has never been easier. Candidates have fewer options, and you’re better equipped to poach from later-stage companies where many employees are depressed by layoffs and underwater operations on their equity grants.

#3 — 2023 will see an explosion of Vertical SaaS: One of the big reasons is that the infrastructure for starting a vertical SaaS company has gotten so much better. Want to embed payments? Use Moov. Do you want to enter a loan? Use OatFi. Do you want to enter salary? Use salsa. And those are just a few options from companies that I’ve supported over the years. A comprehensive market map will cover 50+ infrastructure providers with many many other options in each of these categories and beyond. Better infrastructure means startups can get to market faster, while adding more ways to make money with less staff and capital.

#4 — By 2023, most new fintech companies will be B2B: Many of the iconic companies in fintech over the past decade have been consumer (think Robinhood, CreditKarma, Betterment and Chime to name a few). Today’s entrepreneurs seem increasingly focused on B2B opportunities. Hundreds of repeat founders and thousands of fintech employees, many of whom worked at these iconic consumer companies, have now spent a decade or more understanding how the pipes are broken and they want to fix it. This is not to say that there are no opportunities in consumer (I have talked about where these opportunities are before), but that the balance has shifted to B2B. In fact, even incumbents like Goldman are scaling back their consumer offerings.

#5 — By 2023, multi-stage companies will begin to withdraw from Pre-Seed & Seed: Pre-Seed and Seed is a unique stage in a company’s life that is often best served by specialists. Large multi-stage companies entered the seed market not because they were uniquely positioned to serve these companies, but because they did not want to pay absurd prices for Series As and beyond that prevailed before mid-2022. Now these multi-stage companies, faced with building a larger stable of Seed games (many of which recently struggled to raise expansions), likely spending more time pursuing attractively priced Series As and Bs. This isn’t to say that multi-stage companies won’t do Seeds or can’t be fantastic partners for the right founding teams, just that the balance of their investments will start to shift back to stages where they’ve historically been most active.

#6 — In 2023, regulatory turf wars will continue: A sad fact about innovation in financial services is that you often have to deal with more regulators than you can count. A typical fintech company may be licensed with 50 state regulators and have aspects of their business overseen by 1 to 10 federal regulators, either directly or indirectly through a partner such as a Banking-as-a-service provider. Adding to this chaotic regulatory stage are ongoing turf wars, which make business building even more challenging. Who will regulate crypto? SEC or CFTC? Who will regulate lending to small businesses? The CFPB has consumer in its name, but expands its mandate to cover some aspects of business lending. We will see skirmishes in these areas and more. As always in fintech, a top-notch general counsel is a must.

In summary, there has never been a better time to start a fintech company! Happy 2023!