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House of Fintech 2 - Fintech continues to be funded in Baltics

During active times of September, after so many online events, House of Fintech gathered the leading Fintech entrepreneurs and professionals at Venture Faculty Space for a second offline event House of Fintech - to hear opinions of top players and to discuss actual topics of funding for Fintech industry during current COVID-19 crises.

Baltic community shared opinions about the luck to be working and living in the Baltics during these days, to have a possibility to perform normal business practices, to set up companies, arrange conferences and not to be isolated. Seems that it might give advantage to the Baltics, in comparison to quarantined economies.

However, time does not stand still and according to Renats Lokomets (Venture Faculty) opinion: If in standard situation startup founders needed to concentrate on hiring and portfolio funding, then today's management of Fintech companies’ need to divert their attention to funding both equity and debt. Panelists as Cristobal Alonso (SWG) additionally agreed that now profitability and effectiveness have crucial value for the future possibility to attract money to any startups.

Unique remote work opportunity seems in current time helping the development of startups, as the only time zone is the stopper. In addition, Roberts Bernans (Nordigen) [who just closed the round for his company] assumed that PR is important, but the company uses it mainly for hiring, engineering is good in Latvia and salable salespeople are needed to be educated and locally grown. Latvian Fintechs need to concentrate on the global market but keeping local talent motivated.

Cristobal Alonso thought that a good exit is required in Latvia to boost the venture industry. A lot of talents are here in Riga but the majority of them are employed. New legislation that just published and supported by and LIAA in September 2020 might create a better climate for the development of startups (including fintech).

Insights from VC for Itech Capital were clear, the crisis is still not over and cash is more king then it was in normal times. Tough reality might be different in the next two quarters after the post-US election mess. The election in the US can significantly change the venture market and decrease the appetite of venture capitalists to invest in all rounds of fundraising. However, as Gleb Davidyuk assumed that Americans are very business-oriented and thus good deals would continue happening. Currently, VC trying to forecast not the closest future of 2021 but valuating the investment based on the performance of 2022 and forward.

Startup Wise Guys accelerator continues to make investment and there is an increasing number of companies in the pipeline (if VC is active) since angel investor’s channels are almost dry now.

A lot said about competition between VC and different crowd investing platforms. Anton Tikhonov (from SEEDRS) concluded that this alternative for equity fundraising is very attractive now, as institutional investments are slow and with less risk tolerance. However, crowd investing has its own problems since it targets to many uneducated investors; the high valuation as in the case of EstateGuru could be reached but the value of the investment could lack.

Numerous bankers also participated in the event. Robert Idelsons shared his opinion about the industry, he likes Fintech and since banks have a surplus of funds to invest in fixed income products, Signet Bank plans to continue organizing bond issues including debt and mezzanine. The bond market has a pretty good future in the Baltics and the cost of funding might go down. Negative interest rates in Europe pushing investors (only in Latvia around nine milliards EUR are allocated in deposits in banks) to invest in bonds and other debt products including P2P Platforms even though significant outflow of funds at the beginning of the year due to series of financial scandals and COVID-19 impact. Artur Geisari, panel discussion moderator and head of SME at Crowdestor, shared the common opinion that a platform with a good business model and with regulated or quasi-regulated structure might have a bright future.

In addition, the issue of banks and neobanks was covered as well and their future alongside the old banking industry. In conclusion, it is clear that more regulation will be in place but banks will exist until governments would like to control the financial sector. In Latvia, there is a sign that one or more banks would be owned by local investors and will play a significant role in the market. Based on discussion during the event both equity and debt funding are available and reachable for developed and startup Fintech companies and as Alex Novozhenov mentioned growth of this industry is possible in way of collaboration and cooperation with banks.

Venture Faculty and its co-hosts Crowdestor and Crasulla planning to continue hosting the House of Fintech in good faith to increase Latvian Fintech industry awareness around the world.  

Link for the full conference: