Fintech investors now prioritise profitability over valuation

An expert said fintechs must have more than one revenue stream to attract investors amidst economic slump.

- Noreen Jazul

FINANCIAL SERVICES 

Investors have now pivoted from future business valuation to a Profit and Loss (PNL) model when evaluating which fintechs to support in the face of higher cost of capital and volatility in the market.

Anton Ruddenklau, partner and global head of fintech at KPMG International, said many investors are focusing on metrics such as revenue, customer acquisition number, and profitability in a bid to re-correct their investments.

Decline in funding

The shift in inventors’ focus is also amongst the reasons why funding for fintechs in Singapore and globally declined in 2023. In 1H23, Singapore recorded a 41% HoH decline in funds raised, with deal value dropping to US$934m across 84 deals from US$1.6b across 117 deals in 2H22.

To continue receiving funding from investors, Ruddenklau said fintech founders must be able to show prudence and that they have got “structural profitability.”

“Having a structurally profitable business means your unit economics, your cost of product, your cost of customer acquisition can produce direct profit right now,”Ruddenklau said.