It has been almost a year since we entered this period of market upheaval, and the venture ecosystem is still far from stable — in fact, the ground is still moving.
Venture capital firms are feeling the pain with adjustments being made to prior funds and a slowdown in securing limited partnership commitments as potential investors follow a flight to certainty.
We are still at the beginning of the consolidation that is coming at the growth stage.
Many Series B+ startups have used insider rounds or extensions to delay the need to raise a priced round at a material discount. The fortunate few that raised sizeable rounds over the past 24 months are constantly optimizing their burn to push their runway as far into 2025 as possible.
But the end of that runway is getting closer for the rest.
Existing investors are hesitant to continue to fund startups and are now more willing to explore potential mergers and acquisitions that offer near-term paths to liquidity at lower costs. Expect to see an increase in so-called distressed asset sales over the next six to 12 months even in previously well-known fintech startups or unicorns.
But amidst the turbulence, investment is still happening.
The early stage is the focus as investors shift attention from the seed to Series A space untouched by the inflated valuations of their predecessors. However, the bar has been raised with even proven repeat founders not guaranteed to secure funding.
We are seeing the narrative for this next age of fintech being written as we speak with investors trying to separate flavors of what has existed before from the truly breakthrough first-of-its-kind technologies.
Despite the perpetual doom and gloom, I remain optimistic and excited. This will require venture investors to test their discipline in a different environment, finding the right opportunities in a period of rapid correction versus the past decade of growth.
At FIS®, we’re ready for that challenge. The future is bright even if it feels a little hazy today.