Three Ways Fintech Leaders Can Create a People Strategy

Bryan Ignozzi, CEO, leads Executive Search at Raines International and is on a mission to maximize human potential.

To say it’s been a tumultuous few years in fintech would be an understatement. In the final quarter of Q3 2022, fintech funding fell 64% year-on-year, according to the latest figures from CB Insights. In the same quarter, only six “unicorns” (startups that reached over $1 billion valuation) emerged compared to the record 48 born a year earlier.

Many founders, CEOs, financiers and boards have waited and now face particularly uncertain market conditions and a potential recession. Uncertainty creates additional pressure on managers, affects the work performance of teams and creates ideal conditions for higher staff turnover and higher incidence of business failure.

In today’s market, managers must ensure that they invest (time, energy and money) in things that will strengthen their business, utilize their existing resources effectively and actively recognize and mitigate potential risks. A well-balanced strategy for people can allow you to not only survive a potential recession, but also to take advantage of the potential opportunity a recession can present. I have examined three key person strategies here today:

Talent

Talent is a key factor for success regardless of the industry or stage of a company. In this business environment, leaders must consider how to keep their talent engaged, maximize the human capital in place and keep the best people moving forward.

In all aspects, a focus on diversity is necessary not only for a robust talent strategy, but for the overall health of the organization. This is especially true in the fintech space where shockingly low levels of diversity in leadership (and funders) persist.

Research has shown time and time again that diverse (and inclusive) teams and the individuals who work in those environments contribute to better business results by reducing the unconscious bias that negatively affects decision-making. Less attention has been paid to the equally important research that shows how diversity contributes to greater organizational resilience.

Diversity can come in many forms: race, gender, background and education. When looking to improve team diversity, many managers neglect the talent that may already exist within the company. Being creative about talent and where it comes from can help you not only leverage underutilized resources internally, but also tap into previously unconsidered industries or backgrounds when conducting an external search.

However, remember that a culture of inclusion is necessary to truly reap the benefits of a diverse team or environment.

Communicating with openness and clarity to your organization can build your team’s trust in you and the quality of your decision-making. When someone communicates with openness but without clarity, credibility can be undermined because each listener will assign their own opinion and inconsistencies can come to the fore.

Likewise, clarity without openness can create a closed culture where people feel disengaged. The balance between the two will vary depending on the audience, but keeping an eye on both can allow that line to be walked.

Play both offense and defense

According to the same CB Insights report, fintech funding fell to $12.9 billion in Q3 2022, the lowest level since Q4 2020. The average deal size is down 38% from $32 million in 2021, and 2022 has has been called the “year of termination” by some. While these numbers are shocking, they distract from the overall message that fintech funding is still generally stronger than 2020 levels, and the massive boom cycle of the last six quarters was the exception, not the rule.

Companies must play both offense and defense in their strategy. During periods of recession, companies have the opportunity to move beyond their peers and emerge stronger from the winning process. At the same time, funds are more selective with their investments, and the need for differentiation and a clear path to profitability is clear.

Managers must have a balanced approach to risk. Extra care should be taken for those organizations that have experienced explosive growth in the past 16 months and may not have leaders or advisors who have lived through the 2008 recession or dot-com crash.

Alternatively, the more experienced managers should keep an eye on new competitors and challenge themselves to innovate, not just improve. Different decision-making teams that draw from varied backgrounds and experience can help you walk this line.

Break down barriers

When faced with uncertainty, your ability as a leader to break down barriers and identify your market or build one where none exists is extremely important. Barriers exist internally within organizations and from external factors. In some cases, we can control or at least reduce internal barriers by using organizational leverage.

A well-defined value and purpose proposal can help to bring clarity to people, organization and culture. Focusing on your purpose can help with external communication with stakeholders and customers. Using a purpose proposal to create clarity and alignment can benefit everyone and provide a sense of connection and inclusion.

To break down barriers, you have to be brave and rely on organizational support or create support around your initiatives.

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