Fintech News

How is Fintech Helping Startups Raise Capital?

The mash between finances and technologies led to the creation of a new and incredibly successful sector called fintech (or financial technology).

Fintech evolved from the back-end systems used in financial institutions to today’s plethora of customer-oriented services that make the connection with banks and other similar institutions smoother and easier.

Plus, the field was one huge step forward for the development and use of cryptocurrencies such as Bitcoin, Ethereum, and many others. But, even though the latest headlines are mainly about crypto, fintech can also help startups find alternative funding solutions for their own development and growth. 

If you’re interested, here are a few ingenious ways in which fintech makes it easier for startups to raise capital. 

Flexible Funding Solutions

Traditionally, small businesses in need of funds would have options such as angel investors, venture capitalists, and/or banks. However, none of these come cheap and without restrictions that have a long-term impact. In a nutshell, all these options are rigid and have the capacity to stifle a startup’s development if things don’t go according to plan.

Due to the amazing growth of fintech, startups nowadays have access to financing solutions like Capchase where they can turn recurring revenue into flexible growth financing. This type of financing lets you adjust monthly payments to the monthly revenue, which makes it easier to move forward even during slow growth periods.

Easier Access for Investors

Traditional financing solutions are also restrictive when it comes to who can invest. Elevated transaction costs and large minimum tickets raised the bar so high that only the most wealthy could have their choice of projects. 

Fintech changed this aspect and opened the investment market to anyone interested. That’s because the minimum investments are very low and if you invest in ICOs, the fees are close to negligible. 

As a result, today’s startups have more investment opportunities as more people keep a close eye on what’s new on the market. This makes things a lot more interesting and diversifies the possibilities.

Crowdfunding

When you say crowdfunding, most people think about the most-famous platforms like Indiegogo, SpeedInvest Technology (great for startups), or GoFundMe (mostly for individuals). However, the crowdfunding market is way more diversified, with over 600 active platforms around the globe.

While crowdfunding is also a system made possible by fintech, it’s mostly for early-stage financing, before your startup catches the eye of a more reliable investor. Through crowdfunding, you also have a great chance to get the brand out into the world and get people to notice you.

It’s also a great way to gather seed money for the initial stages of the startup, but the chances of raising enough capital to move further are rather slim (only 23% of campaigns get funded in full). 

Besides the marketing advantages, you can get amazing feedback on your products or services. And since you’re in the early stages, you can make changes and improvements without disrupting the entire production cycle. 

Wrap Up

Fintech may be an established field right now, but when it first started it was a disruptor and it produced a lot of changes (both positive and negative).

Overall, innovation in technology is the force that drives forward the business sector and the world, which is why tech startups are the most likely to find investors and alternative solutions to raising capital. 

Of course, startups in other fields also benefit from the changes produced by fintech. Overall, whether you choose an alternative financing solution or you stick with the traditional system (or a combination of both), it helps to be creative and make use of all the tools at your disposal. 

Angela Scott-Briggs

Editor, TechBullion.com | Interested in Innovations in Business, Finance, and Technology .

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Angela Scott-Briggs

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