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The decade-long summer of free money is over. Venture funding declined by $90 billion (53%) in the third quarter of 2022 from a year earlier and fell $40 billion (33%) compared to the second quarter, per Crunchbase data. That makes Q3 2022 the slowest quarter for VC funding since the start of the pandemic.

However, in spite of all the crazy stories this year, there are real opportunities for aspiring fintech startups to become the new heroes of the multitrillion-dollar banking and embedded finance industry.

In particular, I’m hearing that investors are reluctant to fund future potential unless it comes hand in hand with concrete customer traction. So if you’re building a fintech idea and you need funding today, it’s vital to get your product into the hands of customers quickly.

How will you do that? By gathering feedback, using it to sharpen your focus and prioritization and ultimately rewarding your customers for helping you.

Here are three tips for achieving those goals:

Get feedback and insights from your customers with a working product.
Aim high for the long term, but don’t work on anything except your minimum viable product (MVP) in the short term.
Always remember the problems you’re trying to fix for people and reward them for choosing you.

It’s critical to gather feedback and insights from your customers

In this operating environment, startups have a better chance of impressing investors if they can point to tangible results.

What does that look like in reality? Prepare for these common questions before you head to an investor meeting with your pitch deck:

Who are your users?
What are the problems you’re trying to fix for them?
What do they like and what do they want?
Where are you going to meet them?

The only way to find these answers is to ship something real — a working product that people can interact with and use. That means everything you’re building right now should be in service of getting an MVP out the door.

I’m not saying, “Build it and they will come.” Far too many tech companies shut down shop because they were making solutions in search of problems. It is really easy to slow yourself down by thinking too far ahead in terms of what you need to create.

For instance, if you’re building a consumer fintech startup, do you really need to build your own payments processor? In my experience, that would take 10 to 20 engineers, about 18 months and millions of dollars, and they’d likely end up building something that may never see the light of day.

Eighteen months is a very long time in an environment where fintechs and embedded banking startups can get to market in three months, if not faster, according to Bain & Co. research. Moreover, speed begets opportunity: The study expects embedded finance transactions in the U.S. to surge to $7 trillion over the next four years, up from $2.6 trillion at present.

How can fintech startups outlast the VC winter? by Ram Iyer originally published on TechCrunch

Superscript, an insurance broker and tech platform targeting SMEs and “high-growth” tech firms, has raised £45 million ($54 million) in a Series B round of funding

Founded out of London in 2015, Superscript constitutes two core insurance businesses: an online-only “self-serve” platform that’s available to U.K. customers including SMEs, sole traders, and landlords, and an advised broking service called SuperscriptQ that’s available in the U.K. and across the European Economic Area (EEA). This is targeted at tech businesses with complex risks that are more difficult to insure such as medical malpractice or professional indemnity, with customers including London-based fintech unicorn Paddle.

The underwriting factor

As with just about every other sector, the insurance tech industry has been hit hard by the global economic downturn, with the likes of Policygenius andNext Insurance all cutting back their headcount over the past year, while publicly-traded firms such as Lemonade, Hippo, and Root all trading way down on last year.

But for every yin there’s a yang, and there are signs that the insurtech realm is still very much alive and kicking. Germany’s Wefox last year raised $400 million at $4.5 billion valuation, while Ohio-based Branch reached unicorn status off the back of a $147 million raise. And now, it’s Superscript’s turn to remind the world that insurtech might be doing just fine after all..

But what separates the wheat from the chaff in insurtech — why do some float while others flounder?

“Insurance has a more complex value chain than most tech businesses, in that you need to focus on both your acquisition strategy as well as the going performance of the policies that you’re selling,” Superscript cofounder and CEO Cameron Shearer explained to TechCrunch. “While fast-growth in customer numbers is typically seen as a good thing, if the underwriting is not right then claims — in other words, losses — will start to compound overtime. If you carry long-term liabilities, then you might not experience the business’s ‘true’ results for a number of years.”

Superscript’s underwriting partners include a slew of well-known names from the insurance world, including AXA, Beazley At Lloyd’s, RSA, and MS Amlin. And this multi-carrier approach, spanning regions and sector-specific expertise, is partly why Shearer thinks that Superscript is well-positioned to flourish as it looks to scale over the long-term. It’s all about providing bespoke coverage for the types of risks that SMEs specifically need.

“Historically, many investors have mirrored the tech-investment models and focused on acquisition,” Shearer added. “More recently, now with the hindsight of more mature insurtechs and a number of IPO experiences, we’ve seen investors shifting focus towards underwriting differentiation and strength. Superscript has focused on sustainable growth and quality underwriting from day one to give us more favourable loss ratios. Sophisticated underwriting, tech and data capabilities enable us to provide a highly personalised user and underwriting experience.”

From a technology and data perspective, Superscript says it uses “proprietary machine learning technology” to set itself apart, including throughout the acquisition and onboarding process in its self-serve product which guides would-be customers toward the correct channels. And big data insights is also a big part of its promise, where it uses machine learning models to price its risks “more accurately” through crunching a range of data points.

“Other parts of our tech looks at data we’ve collected about the insurance market to assess the probability of where risks are likely to be accepted by insurers and carriers, and what data points are key to a particular insurer’s underwriting process,” Shearer said. “This again drives operational efficiency for both our process and the insurers.”

The company had previously raised around $24.4 million, including a roughly $20 million tranche raised across two rounds in 2020. With another $54 million in the bank, the company said that it plans to bolster its underwriting and broking capabilities, and continue investing in its machine learning tooling.

While Superscript is limited to the European market, it has longer term ambitions to become a global player. In fact, it already claims some clients in North America, Australasia, and the Middle East, though apparently they are customers who need access to the European insurance markets.

Superscript’s Series B round of funding was led by Comparethemarket owner BHL UK, with participation from The Hartford, and Concentric.

Superscript, a bespoke insurance provider for SMEs, raises $54 million by Paul Sawers originally published on TechCrunch

Releaf, a Nigerian agritech startup that supplies ingredients (starting with the oil palm) to consumer goods manufacturers and their food factories, has received $3.3 million in an oversubscribed pre-Series A round.

The Jack Ma Foundation-backed startup, which announced a $4.2 million (including a $1.5 million grant) seed raise in September 2021, said the funding will support the launch of two new technologies: Kraken II and SITE.

Releaf focuses on value chains where smaller factories are set up near smallholder farmers, allowing them to get better processing yields and less expensive logistics costs. The oil palm is the first, and for now, the only crop Releaf works on; the oil palm market is a $3 billion market that consists of over 4 million smallholder farmers. These farmers drive about 80% of the crop’s production using rocks or inefficient hardware, responsible for producing low-quality vegetable oil. That’s why the agritech launched Kraken, its static palm nut de-sheller machine built to process this crop and efficiently extract “high-quality” vegetable oil for farmers.

“Our seed round was focused on essentially getting the first evolution of Kraken and proving that we can be the first company to take multiple species of very poor quality smallholder palm nut and turn them into high-quality palm kernel oil,” Uzoma Ayogu, co-founder and CTO, told TechCrunch in an interview.

“After proving that, we needed to figure out how to best place this technology dynamically and, over the last couple of months, made progress on Kraken’s evolution from being static to being portable and reducing the cost significantly [Kraken II] while adding new products [SITE] to complement the suite of tech that we have already.”

Kraken II is a mobile and less expensive version of the palm nut de-sheller, costing half as much and eliminating over 80% of margin-eroding costs. On the other hand, SITE is a geospatial mapping application that discloses food processing assets. SITE was developed in collaboration with Stanford University’s Professor David Lobell, a MacArthur Fellow, and Director of the Center on Food Security and the Environment, whose team refined the age identification process for oil palm trees in Nigeria.

According to Ayogu, the YC-backed Releaf figured out that just building tech wasn’t enough to get the best margins for farmers and manufacturers but that the tech needed to be in the right places and at the proper season across different regions in Nigeria. Hence the reason for Kraken’s portability and SITE’s placement and route planning capabilities. The combination of both enables the Uyo-based Releaf to target the best opportunities across Nigeria’s oil palm belt rather than being limited to sourcing crops within 100 kilometers of a fixed processing site like existing food processors.

“The biggest benefit to them [farmers] with this new evolution of Kraken and SITE is that many offer farmers poor prices because they have to pay a lot for logistics. But now that we can eliminate 80% of the logistics costs and process much closer to the farmers, we can pass a lot of that profit back to them while also keeping more of it for ourselves while improving even the quality of the end product,” said Ayogu, who co-founded Releaf with CEO Ikenna Nzewi on why this new technologies matters for farmers.

In Nigeria’s food processing industry, there’s more competition downstream, dominated mainly by middlemen and traders, usually single-person or few-person outfits that tend to be closer to consumers and have better pricing power. It’s different for Releaf, which operates upstream and has less competition, at least when the application of tech is considered. Offering farmers better prices and providing working capital are two ways Releaf uses to gain market share in this segment, Ayogu noted.

The startup has used its supply chain technology to process more than 10 million kilograms of palm nuts since the launch of Kraken in 2021. As a result, Releaf has grown its monthly revenue 7x year-on-year, which is set to increase this year following the securement of over $100 million in supply contracts from consumer goods manufacturers in Nigeria.With this funding, the agritech, whose valuation has tripled since its seed round, will be looking to expand the regions where it processes palm and extend the crop types it works with.

“Our insights have shown that downstream is capped by supply, which is upstream,” the CTO mentioned. “And so our focus is via the first mover advantage with differentiated technology, we can capture a significant amount of supply in a fragmented market and then over time verticalized to increase margins and market position.”

The pre-Series A funding was led by Samurai Incubate Africa, who re-invested after leading Releaf’s seed round, with participation from Consonance Investment Managers. Stephen Pagliuca (Chairman of Bain Capital) and Jeff Ubben (Board member at World Wildlife Fund and Founder of Inclusive Capital Partners) also invested. Rena Yoneyama, managing partner at Samurai Incubate Africa, speaking on the investment, said: “Releaf’s success with its pilot Kraken validates its thesis, and we are excited to continue supporting their ambitious vision to create efficient supply chains within Africa’s agricultural market.”

Nigerian agritech Releaf gets more capital as it launches new tech for food processing by Tage Kene-Okafor originally published on TechCrunch

An influential industry group that represents Google, Meta and Amazon among other tech firms has expressed concerns about the digital competition law recommended by an Indian parliamentary panel that seeks to regulate their alleged anticompetitive practices, calling the proposal “absolutist and regressive” in nature.

The Parliamentary Standing Committee on Finance recommended last month that the government enact a digital competition act to regulate anticompetitive business practices by Big Tech companies on its platforms, prohibiting them from preferentially promoting their in-house brands or not supporting third-party systems. The competition act, the panel said, “will be a boon not only for our country and its nascent startup economy but also for the entire world.”

Industry group Asia Internet Coalition said in a statement that the proposed digital competition law may hurt digital innovation in India and could impact the investments by businesses in India and have “disproportionate costs” to consumers in the South Asian market. “The report put forward by the committee is prescriptive, absolutist and regressive in nature,” it added.

The Indian panel said last month that its recommendation was systemically important to counter monopoly and warned that tech giants “must not favour its own offers over the offers of its competitors” when acting as mediators to supply and sales markets.

The parliamentary panel’s recommendation cites the EU’s proposed Digital Markets Act and the U.S.’s American Innovation and Choice Online Act and the Open App Market Act.

The industry group AIC said that both AICOA and OAMA have “failed to attain bipartisan support due to substantive disagreements and concerns for unintended consequences on consumers, growth, and innovation. In sum, there is no consensus that a DMA-style ex ante legislation is the way forward for addressing potential competition concerns in the digital space,” it said in the statement.

India is the world’s second largest internet market and has attracted over $75 billion in investment from firms including Google, Meta, Amazon and investment shops Sequoia, Lightspeed, SoftBank and Tiger Global in the past decade. New Delhi has enforced and proposed a number of policy changes in the past three years to bring more accountability and fairness in how the tech firms operate in the country in moves that have rattled many U.S. giants.

New Delhi is entering 2023 with several more such policy changes, including a telecom law that would tighten the government’s grip on internet firms.

“We urge the government to first observe whether these overseas regulatory developments bring about benefits that outweigh costs. Specifically, it is important to note that the government has recently proposed two significant bills, i.e the Digital Personal Data Protection Bill and the Competition Amendment Bill (CAB), both of which seek to protect consumers, preserve competition and promote tech innovation, with a special focus on digital markets,” said Asia Internet Coalition.

“Accordingly, it is critical to first understand the effects of these two bills on the digital ecosystem before introducing any new legislative proposals.”

Google chief executive Sundar Pichai said last month that India was going through an important period of time as it drafts several key regulations and asserted that it stands to benefit from open and connected internet.

US tech giants say Indian panel’s recommended competition act ‘absolutist and regressive’ by Manish Singh originally published on TechCrunch