Bryan Ignozzi, Managing Director, leads Executive Search at Raines International and is on a mission to maximize human potential.
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To say that it has been a tumultuous few years in fintech would be an understatement. This past quarter of Q3 2022, fintech funding dropped 64% year-over-year, according to the most recent numbers from CB Insights. In the same quarter, only six “unicorns” (startups that reached over $1 billion valuations) emerged as compared to the record-setting 48 that were birthed a year earlier.
Many founders, CEOs, funders and boards have been left reeling in the whiplash and are now facing particularly uncertain market conditions and a potential recession. Uncertainty creates additional pressure on leaders, affects the work performance of teams and creates ideal conditions for higher staff turnover and higher rates of business failure.
In today’s market, leaders need to ensure they are investing (time, energy and money) in things that will strengthen their business, utilizing their existing resources in an effective manner and actively recognizing and mitigating potential risks. A well-balanced people strategy can allow you to not only survive a potential recession but also to capitalize on the potential opportunity a recession can bring. I have examined three key people strategies here today:
Talent
Talent is a key differentiator of success regardless of the industry or stage of a company. In this business environment, executives need to consider how they will keep their talent engaged, maximize the human capital in place and bring on the best possible people to keep moving forward.
In all aspects, centering on diversity is necessary for not just a robust talent strategy but for the overall organizational health. This holds 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 working in these environments contribute to better business outcomes 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 resiliency.
Diversity can come in many forms: race, gender, background and education. When looking to improve team diversity, many leaders neglect the talent that may already exist within the company. Getting 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.
Keep in mind, however, that a culture of inclusivity is necessary to truly benefit from the advantages of a diverse team or environment.
Communicating with candor and clarity to your organization can build your team’s trust in you and your decision quality. When someone communicates with candor but without clarity, credibility can be undermined because each listener will assign their own meaning and inconsistencies can rise to the forefront.
Similarly, clarity without candor can create a closed culture in which people feel unengaged. The balance between the two will vary depending on the audience, but keeping a close eye on both can allow that line to be walked.
Play Both Offense And Defense
According to that same CB Insights report, fintech funding fell to $12.9 billion in Q3 2022, its lowest level since Q4 2020. The average deal size is down 38% from $32 million in 2021, and 2022 has been termed the “Year of Layoffs” by some. While these numbers are shocking, they distract from the overall message that fintech funding is still overall stronger than 2020 levels and the massive boom cycle over the past six quarters was the exception, not the rule.
Companies must play both offense and defense in their strategy. During periods of recession, businesses have the opportunity to move beyond their peers and emerge stronger from the winnowing process. At the same time, funds are being more selective with their investments, and the need for differentiation and a clear path to profitability is clear.
Leaders must take a balanced approach to risk. There should be added caution for those organizations that have experienced meteoric growth over the past 16 months and may not have leaders or advisors who’ve lived through the 2008 recession or dot-com crash.
Alternatively, those more seasoned leaders should keep an eye on emerging competitors and challenge themselves to innovate, not just improve. Diverse decision-making teams that draw from varied backgrounds and experiences can help you walk this line.
Break Down Barriers
When facing uncertainty, your ability as a leader to break down barriers and identify your market or build one where it doesn’t exist is exceedingly important. Barriers exist internally in organizations and from external factors. In some cases, we can control or at least mitigate internal barriers by using organizational influence.
A well-defined value and purpose proposition can help bring clarity to your people, organization and culture. Focusing on your purpose can help with external communication with stakeholders and clients. Using a purpose proposition to create clarity and alignment can benefit everyone and allow for a feeling of connectedness and inclusion.
To break down barriers, you have to be bold and rely on organizational support or create support around your initiatives.
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