FinTech Fundraising 101: Strategies for Success in a Challenging Investment Climate

By Nicolai Chamizo, Founder and CEO of Incore Invest.

The FinTech funding landscape has shifted dramatically in recent years. The days of abundant capital and sky-high valuations are over; startups now face a far more selective and challenging investment environment. According to a recent survey, 72% of FinTechs are actively seeking funding, yet a quarter have been forced to rethink their strategies due to limited success.

For early-stage FinTechs, this presents both a challenge and an opportunity. While the barriers to securing investment have grown, the right businesses with a clear market need, solid unit economics and a scalable proposition are still attracting capital. The key is knowing how to navigate this new reality and adapt to investor expectations.

The Investment Climate is More Selective and More Scrutinised

The FinTech sector is facing a funding reset. In 2024, global venture capital investment in FinTech reportedly declined by 20%, reaching its lowest level since 2020, as investors became more cautious due to economic uncertainty, rising interest rates and increased regulatory scrutiny. While some capital has returned in 2024, it is clear that investors have fundamentally changed their approach.

Early-stage startups face heightened scrutiny. Investors are no longer simply backing bold ideas; they want evidence of product-market fit, strong revenue potential, and a clear path to profitability. The days of funding high-burn FinTech with vague monetisation strategies are fading. Instead, investors are prioritising companies that demonstrate financial discipline, operational efficiency, and tangible value creation.

One of the most visible trends is the focus on FinTech, which leverages AI, embedded finance, and regulatory technology (RegTech). These areas align with investor priorities around automation, compliance, and cost efficiency. Meanwhile, startups in oversaturated or commoditised verticals, such as buy now, pay later (BNPL), find it much harder to raise capital unless they offer clear differentiation.

How FinTechs Can Adapt: Strategies for Securing Funding

A shift in approach is essential for FinTechs looking to raise investment in this environment. The following strategies can help startups stand out and improve their chances of securing capital.

1. Refine Your Value Proposition and Market Positioning

Investors need an apparent reason to back a FinTech, particularly in a crowded market. That means founders must be able to articulate their unique value proposition in a way that resonates with investors. The key questions that need answering are:

• What problem are you solving, and why is it urgent?
• How is your solution fundamentally different from existing alternatives?
• What is the total addressable market (TAM), and what percentage can you realistically capture?

It is essential to quantify the opportunity through customer traction, revenue projections, or market demand data. Investors no longer buy into vague promises; they want numbers that prove long-term potential.

2. Show Financial Discipline and a Clear Path to Profitability

With profitability taking centre stage, FinTechs demonstrating financial discipline and realistic growth strategies will be in a stronger position to attract investment. That means:

• Keeping burn rates under control and avoiding unnecessary expansion too early
• Demonstrating strong unit economics, including customer acquisition costs and lifetime value
• Having a transparent monetisation model that doesn’t rely solely on aggressive user growth

Investors are increasingly wary of high-burn FinTechs with unclear paths to revenue. The more evidence you can provide that your business is sustainable and scalable, the better your chances of securing capital.

3. Build Strategic Investor Relationships Early

Too many startups approach fundraising as a last-minute necessity rather than a long-term strategy. Relationships with investors take time to build. Founders should engage with potential investors well before they need to raise capital.

Ways to build relationships:

• Attending FinTech and investor-focused events
• Leveraging introductions and existing networks
• Keeping potential investors updated with progress, even before formally fundraising

Investors are more likely to back founders they know and trust. Building these relationships early can significantly improve your chances of securing funding.

4. Be Ready for Detailed Due Diligence

With increased investor caution, FinTechs must be prepared for a more rigorous due diligence process. Investors will be sure to scrutinise financial records and revenue streams, regulatory compliance and risk management, as well as customer acquisition strategy and retention metrics.

Startups that treat compliance and governance as an afterthought will struggle. Instead, proactive due diligence preparation, such as ensuring clean financial records, legal documentation and compliance measures, can significantly speed up the investment process.

5. Leverage Emerging Trends to Strengthen Your Pitch

While overall FinTech investment has slowed, there are strong growth areas where investors are still actively deploying capital. FinTechs that align with these trends will have an advantage. Key areas include:

• AI-driven financial services
• Embedded finance
• RegTech and compliance
• Sustainable and impact-driven FinTech

Aligning with these investment priorities can make FinTech more attractive to potential backers.

The Case for Early-Stage FinTech Funding

One of the most significant risks for the FinTech sector is a slowdown in early-stage funding. While late-stage FinTechs with established revenue streams are still attracting capital, the new startup pipeline is shrinking. If early-stage financing dries up, the long-term impact on innovation in FinTech could be significant.

Investors must recognise that the next wave of FinTech disruption depends on continued support for early-stage companies. While it’s understandable that investors are being more selective, a balance must be struck between risk management and enabling innovation. The FinTechs that succeed in this new funding landscape will be the ones that adapt quickly, focus on real market needs, and build sustainable business models from the outset.