Why Do Some Fintech Startups Struggle to Make a Profit?
Fintech seems to be disrupting the way we handle our finances (in a good way) yet fintechs are finding it increasingly difficult to be profitable. Even though it’s a booming industry, why would these businesses struggle?
Most of the fintech startups today are created by young professionals. While they have a great idea and have the drive to do well, they don’t have the experience and knowledge necessary to raise adequate venture capital, which is where profitability starts. Venture capitalists are also extremely picky in who they invest in – only choosing between 1 – 2 percent of the opportunities that cross their paths.
Not Necessarily the Next Big Idea
While fintech is a booming industry and promises to change the way we handle money, it’s not a billion dollar idea. Since venture capitalists want those billion dollar ideas, they pass over most of the fintech opportunities that they see.
But most fintech startups are so focused on getting venture capitalist investors that they lose focus on growing their business and instead focus on getting investors. They waste precious time that they could use to get more customers and grow their business on potential investors that they don’t get.