Fundraising Strategies for Fintech and B2B SaaS Companies in 2024

The early stage fundraising landscape for Fintech and SaaS startups is looking to recover from a lackluster year of fundraising in 2023 after reaching record highs in 2021. The right strategies can help put your Fintech and B2B SaaS company on the right track in 2024 and into the future with any fundraising goals. From debt to using venture capital to securing funding from angel investors, there are a variety of strategies that companies can – and should – use to their advantage.

However, fundraising for Fintech startups also comes with various challenges. For instance, securing Series A and seed-stage funding has become more difficult. There are also higher investor expectations, which startups need to meet in their pitches and follow through afterward.

In this post, we’ll discuss fundraising, especially as it pertains to equity, debt and strategy. Read on to learn more about taking fundraising for your Fintech startup to new heights or contact Graphite Financial today for more information on Fintech solutions.

The Fundraising Landscape in 2024: Challenges and Opportunities

Fintech and SaaS startups face new challenges today than they did during the Fintech fundraising boom of 2021. For instance, Series A funding, which is when a company raises capital to scale its business following the first phase of raising funds, is becoming more challenging due to greater investor demands for data that can help back up potential ROI.

Another challenge involves navigating regulatory requirements that may impact the fundraising process. 2023 has been largely dubbed a correction year that was largely marked by a decline compared to previous big gains. There’s a big question of how much appetite there’s going to be from large financial institutions regarding partnerships with Fintech startupa. There’s also regulatory scrutiny. The bar has certainly been raised in this regard.

However, despite the challenges, there’s opportunity. Strategic partnerships are one such opportunity that many companies are likely to take advantage of. Family offices, which are private wealth management firms for high-net-worth families, are also increasingly shifting strategies toward overseeing investments designed to create greater social or environmental impact. These opportunities really present potential for the companies that take advantage of them.

Preparing for Series A: Key Metrics and What Investors Want to See

SaaS and Fintech founders rely on Series A funding to scale – but acquiring it can be difficult.

Investors are still weighing key variables like potential and carefully assessing the business model, but they’re being increasingly diligent in other ways. For instance, they’re more carefully analyzing various business and accounting metrics, like ARR, churn rate, burn rate and unit economics. These are all important metrics that investors are increasingly weighing to ensure the long-term sustainability and viability of the business in question.

On this note, investors are increasingly looking for product-market fit and growth potential. They want to ensure that their investment will have a return – and their decisions on where and with whom to invest with are often backed by the information they glean from such assessments. In the past, charisma and a great story might have been enough. That’s not the case anymore. Charisma and a great story are still important, but investors are also looking for proof points in the numbers. Preparing for Series A funding is really about professionalizing the product or service that you’re going to put forward.

Raising Seed Capital: Focus on Product-Market Fit and Projections

Seed stage capital, or seed funding, is the first stage of fundraising that consists of raising capital to support early development and market research. It may also be used to hire certain employees and help with product development.

It’s important to “walk back the clock” and know when you’re going to be in certain investor conversations so you can ensure you’re building in system development and metric development and know who’s going to be out there telling the story about your company. Know and manage the calendar.

Some of the strategies that Fintech and SaaS companies should utilize to raise seed capital include:

• Knowing what types of product-market fit investors are looking to support.
• Ensuring your forecasting and projections are accurate.
• Be ready months before you go to market.
• Network as often as possible. Not only can you learn from the experience of your peers, but you’re also likely to make connections through them with potential investors.
• Have a compelling business story that connects with potential investors. Drill down the metrics that are going to matter and tell that story.
• Think outside the box on how you attempt to raise capital, especially with family offices. Many are interested in specific industries, with Fintech and SaaS being a key market.

Strategic Use of Venture Debt in Fundraising

In the financial sector, anything with the term “debt” in it is usually perceived as a negative, but venture debt can also be used as part of a Fintech or SaaS startup’s fundraising strategy.

Venture debt provides a means for a company to raise funds without sacrificing equity. Venture debt loans are ideal for both startups and companies in growth mode. Venture debt works as a line of credit or fixed loan and is best utilized for capital expenses or funding acquisitions. Unlike equity financing with an investor, venture debt doesn’t come with a promise of a share of the company.

Venture debt is best pursued either after an equity round, when a startup is close to profitability  or when you need to finance between equity rounds. Think of it like an insurance policy as venture debt gives companies a bit of a safety cushion between fundraising rounds. In some cases, it can allow companies to fundraise in a position of enhanced strength.

If you’re seeking venture debt, however, it’s important to be aware of the various terms and conditions associated with this type of financing.

Best Practices for Structuring Your Fundraise: Series A vs. Seed

In the financial industry, there are various best practices involved with any successful fundraiser – and they go beyond just understanding investor expectations and timelines.

For instance, when seeking Series A funding, it’s important to show your market research to would-be investors to showcase how there’s demand for your offering. It’s equally important to prove that you have a business plan to get there.

Pivoting to seed fundraising, it’s best practice for startups to use convertible notes or Simple Agreement for Future Equity (SAFE), which allow startups to receive venture capital funding in exchange for business equity stake at a later date. These are both common ways for startups to raise money throughout their early stages, notably in the seed fundraising phase. Both are often converted into equity after certain events occur, like when the startup raises more money and is on a growth trajectory.

Furthermore, it’s important to build relationships with investors early on in the process and leverage strategic partnerships as necessary to secure funding. This underscores the importance of clear and concise communication, transparency and presenting accurate data.

In addition to this information, another best practice is simply evaluating your Fintech or SaaS startup’s fundraising approach often and consulting with financial advisors for assistance.

Navigating 2024 and Beyond

When challenges arise, so too does opportunity – and while the Fintech and SaaS fundraising landscape is beyond the boom and continuing to sort itself out in 2024, that doesn’t mean that companies are unable to have success. It just goes back to being prepared. Have a strategy in place, be able to show metrics and try to align investors as well as possible. Being prepared and flexible is perhaps more important to fundraising during these times than it ever has been.

Speaking of flexibility, it’s also important to stay informed about market trends and regulatory changes.

Contact Graphite today for a fundraising checklist or to schedule a free consultation.

Prepare for Your Fundraising Journey in 2024

Whether you’re looking to gain newfound insight that can be applied to your fundraising strategy or you’re looking for professional guidance or startup accounting services, Graphite can help. We have a wealth of experience helping Fintech and SaaS startups with all of their accounting needs – from bookkeeping to fundraising assistance. We make sure that every startup that works with Graphite has their own, experienced team working for them and access to an experienced CFO for anything that might be higher level. It’s a part of the Graphite difference and also part of the reason we’ve helped so many Fintech and SaaS startups scale their business.

For more information and to schedule a free consultation to see how we can help boost your Fintech and SaaS fundraising strategies, contact us today.

FAQs

Get more answers to some of the common concerns and issues that young Fintech and SaaS startups often face, notably when it comes to fundraising:

How do I know when I’m ready to raise Series A?

Generally speaking, Fintech and SaaS startups are ready for Series A funding when they’re ready to accelerate their growth or when they’re running out of money. Some signs that a startup is ready for Series A funding include good marketplace traction, revenue growth, sales growth and a good new business to business lost from churn ratio.

What’s the difference between raising from VCs vs. strategic investors?

Venture capitalists are often most interested in return on investment. Strategic investors, conversely, often look to how collaboration with a startup can help boost its business or add a competitive advantage to its current business model.

How much runway should I aim for with my fundraising round?

The answer to this question really depends on your business, the types of fundraising efforts that are underway, the fundraising efficiency ratio and average fundraising ROI, and more.

What role does venture debt play in my fundraising strategy?

Venture debt provides a means for a company to raise funds without sacrificing equity. Venture debt loans are ideal for both startups and companies in growth mode. Venture debt works as a line of credit or fixed loan and is best utilized for capital expenses or funding acquisitions.