S&P Global recently reported a significant 49 per cent year-over-year drop in funding for global fintech companies, amounting to US$23 billion during the first half of 2023. Round values for seed and early-stage firms declined by an average of 12 per cent and 14 per cent in 2022, respectively, while growth-stage and mature startups experienced even lower declines of 43 per cent and 66 per cent, respectively.
It’s not just about the year being 2023 — think about 2020, 2021, or even further back to 2008 or 2009. In the last two decades, we’ve experienced numerous game-changing events. Surviving and succeeding in such an unstable environment requires flexibility.
As the CEO and Founder of Credolab, I embarked on a challenging journey. Being flexible has allowed me to quickly adjust strategies, pivot into new business models (which we’ve done twice), and explore alternative approaches that weren’t evident at the beginning.
Credolab is a developer of digital scorecards and data enrichment solutions for the banking industry, which are based on behavioural metadata. As of now, the company has analysed over 240 million digital footprints and scored 30 million individuals. Credolab’s solutions are currently utilised by more than 200 corporate clients across nine different verticals.
Looking back, I can confidently share some valuable tips for startup founders to thrive in an ever-changing business landscape.
Fundraising: Luck does come into play sometimes
In August 2020, we raised our Series A round. This came just a few weeks after an extreme low in June when our revenue dropped by 90 per cent. When the pandemic hit, lending came to a halt. Everyone decided to preserve cash and cut down operations. Our model, which was “pay as you go”, was affected drastically. Q2 saw the lowest revenue, maybe even lower than in 2017.
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On the other hand, venture capitalists at that time were really looking at the short term. They saw our revenue decreasing and said, “Okay, we’re not interested.” But I learned a lot about how these VCs think. It was a good learning experience.
However, it was tough, as you can imagine. But we were lucky, which does come into play sometimes. The luck was in finding an investor, GBG, who became not only the lead investor for our Series A round and a strategic partner. They knew that the decrease in revenue was not something that would stay with us long-term and that the economy would eventually recover.
GBG was looking at the value we could bring once the economy opened up, and this was a remarkable moment for our business. It goes to show highs and lows in a startup’s journey can occur very close to each other.
After all, communicating with investors may be challenging, but it can also lead to positive outcomes and value for the business. As long as the company has a solid customer base, a profitable business model, and a willingness to learn from investors, it can weather any fundraising challenges and come out stronger on the other side.
Product: Take a risk to change
We developed our first scorecard in 2016, and it was remarkable. Despite possibly being over-optimistic, it was our ticket to success. It demonstrated the immense value we could add to other businesses. A few quarters later, we confirmed the effectiveness of our data.
Since then, we have explored various use cases, not only in risk prediction but also in segmenting personas or developing look-alike models. We constantly strive to cater to different needs, sometimes even tailoring solutions to a customer’s unique request. This has led to some surprising and successful outcomes.
When the pandemic hit in 2020 and revenue dropped drastically, we had to pivot and explore new business models. We discovered that we needed to deliver value from day one and be able to charge for our services upon contract signature, not upon successful integration. Thus, we developed an anti-fraud insights module, an account takeover module, and a data enrichment module.
Now Credolab is on the cusp of securing more subscription clients, leading to increased revenue visibility. By reviewing our revenue model, we launched a new pricing strategy that has received immediate positive feedback from clients. Many clients are able to develop faster sales cycles because of it.
To paraphrase Alice in Wonderland, you have to run with all your legs just to stay where you are and run at least twice as fast to get somewhere. So this year, we launched a new product, which is a personality-based targeting solution. It blends smartphone metadata collection, machine-learning algorithms, and insights from behavioural psychology.
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This allows us to gain a deep understanding of the personality traits of top-performing potential customers. The Credolab team has already analysed 1 million data sets and built a robust framework that is currently deployed in production.
Mindset: Be flexible enough to stay true to your principles
To be honest, I wasn’t very confident at first in 2016 launching Credolab. After years in big corporates, I took time off to complete my MBA from Bocconi University in Milan, Italy. Then I was ready to get back into business.
So, the decision was partly driven by necessity – I didn’t have another job lined up after graduation. I moved to Singapore with my wife and three sons, ready to step significantly out of my comfort zone and embark on this new adventure.
I was an intrapreneur, comfortable in the corporate world, but I wanted to transform myself into an entrepreneur. Now, I find myself navigating through a dynamic, constantly changing landscape, facing unexpected challenges along the way. Adaptability and the ability to embrace change are vital for success, particularly given the volatility of our environment.
It’s fascinating how a paradigm shift can occur in individuals, especially founders and entrepreneurs. Often, we find ourselves doing the same thing repeatedly until one day, a light bulb moment or a hard-hitting realisation makes us rethink everything.
There was a defining moment in 2016. I remember being on a flight from Vietnam to Singapore with my friend, who was also my mentor at Credolab. He made me realise that I had to transform myself, shed my risk management persona, and take on a different role. His words marked a turning point when I realised everything needed to change.
No compromising on the team
Compromises are possible in everything, except that your startup’s team should be superb.
During my whole career, my approach has always been to hire people better than myself. When hiring, one of my key criteria was looking for people more talented and smarter than myself, who would do better in the position than I could ever do.
I brought in people who had a better understanding of marketing, product management, data science, and IT development. This approach has proven most effective – always looking for people better than myself. For example, if there’s a need for credit risk management or data mining from mobile devices, you find people who excel in these areas more than you do.
This tactic effectively elevates the overall performance of your company. Most entrepreneurs tend to hold off on hiring until they can’t manage everything themselves. But our approach is slightly different. You push yourself to the limit, but when you do hire, you ensure they’re more proficient than you in their role.
I’m gonna be honest with you; there were moments when I thought things wouldn’t work out. However, during our darkest days, we managed to secure an investment, which turned everything around. This experience taught me the importance of perseverance.
As a Founder, you must stay resilient, both mentally and physically. Taking care of yourself will enable you to make rational decisions and lead your team effectively.
Remember to trust your instincts, leverage your strengths, and build a team of exceptional individuals. The road may be bumpy, but with the right mindset and approach, you can thrive in a constantly changing business world and turn challenges into opportunities for success.
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