According to a new BCG report, the fintech market is primed for a “substantial uptick” in IPO activity as investor sentiment around UK startups rebounds after a challenging few years. UK fintech funding decreased by 66% in 2023 to $5.1bn (£4bn), with funding spread across 409 deals, down from 592 deals in 2022.
As the Chief Financial Officer of Weavr, an embedded finance startup that successfully raised a $40 million Series A round in 2022, I’ve experienced this shift first-hand. We have responded to the downturn by balancing the traditional need to optimise costs and find efficiencies with a continued focus on making strategic investments to scale, drive business revenue and fuel new opportunities. Through this process, we’ve identified some key concepts that have helped us achieve our goals, the most crucial of which has been the collective adoption of a ‘growth mindset’ throughout the business.
What is a growth mindset?
The growth mindset concept is based on research that found people enjoyed more success when they believed “their most basic abilities can be developed through dedication and hard work; this view creates a love of learning and a resilience that is essential for great accomplishment” (Dweck, 2015). It also found that employees reported feeling more empowered and committed, driving greater collaboration and innovation. ‘Growth mindsets’ are often seen in successful companies where leaders facilitate cross-functional collaboration to pivot quickly, drive organisational alignment and broaden the business through an entrepreneurial mindset.
Startups are excellent environments for embracing this concept. We welcome challenges, view “failing fast” as an opportunity for growth, and see effort as a path to success. However, in recent times where cost controls and cash management have become top of mind, it has been difficult to continue to experiment to find the right path. For example, identifying the ideal customer profile (ICP) and finding product-market fit requires learning via hypothesis testing. The process is iterative and can take many years of research.
At Weavr, we began with a broadly defined ICP and continuously acted on feedback from our sales team to determine whether our value proposition resonated with the companies we were targeting. We also continued to prioritise a pipeline of closely-matched prospects rather than just increasing the number of potential leads, helping us to quickly refine our approach in both Sales and Product. However, this collaboration extended beyond the Sales, Marketing, and Product teams—we also involved other departments in the solution process. Customer Experience and Finance provided valuable feedback, contributing to the overall customer lifecycle. Fast forward two years, and we now have a well-defined ICP with strong traction in several use cases, particularly in employee benefits.
Spend it like you mean it
Investing in a downturn can seem counterintuitive – especially given the uncertainty of when economies will emerge from it – and a common inclination is to cut spending to combat increased costs, rising supply chain issues and slowing sales. While it’s imperative to spend wisely to help your company weather business shocks, it’s equally important to be prepared to emerge from the crisis in the best possible shape. There is no easy way to do this – if you’re in resilience and cash-preservation mode, you can be sure many of your customers are in similar positions, and this naturally affects your revenue outlook.
At Weavr, we have developed a rigorous approach to spending that prioritises investments directly aligned with our goals and objectives and to serve a targeted set of customers to whom we can add value over the long term. During the year, spending is managed and adjusted in line with budgets and forecasts. We also reassess goals and adjust as necessary. While not all employees are involved in investment allocation decisions, they are all accountable for goal setting and contributions to company objectives.
Cultivating the correct culture
Culture is an important element in any company. Creating an environment where employees successfully turn the art of the possible into reality requires hiring with a growth mindset. Building organisations that continually seek to innovate, learn, and demonstrate resilience after facing challenges not only propels the company forward but also fosters a stronger sense of teamwork.
In our early days, it was easier to gather and exchange ideas – all our video tiles fit on one screen during our All-Hands and most of us attended the same meetings. As we grew though, it became harder to stay connected – projects became more complex, teams more specialised, and meetings more transactional. Add in the importance of managing cash runway, and it can feel like we aren’t able to build meaningful relationships to ensure that everyone feels part of the greater mission.
Like many startups, we have also embraced hybrid working. Employees at all levels join ‘virtual coffees’ and socials monthly to exchange ideas, connect and receive reverse feedback. We also hold regular workshops – in person and virtually – to share learnings, and discuss topics and upcoming projects and company progress. Ensuring that there is a constant flow of information and leveraging the expertise of others are key drivers in all of this to find the right balance between business, learning and people connections.
Finding your path
Scaling in itself is difficult; the leadership team needs to manage the strategic art of growing revenues and profitability without an equivalent increase in costs. Scalability also requires investments, whether they are in people, technology or process. This means assessing your business for investment readiness – i.e. does your business have the foundation to support and maintain growth?
In the current environment though, it feels like magic needs to happen – the competition to generate revenue today, whilst concurrently investing in growth, feels at odds with one another, especially in a cash-constrained environment. Thankfully, it is still possible to achieve both, but it requires companies to adopt more strategic and prudent outlooks on development and embrace concepts, such as the growth mindset, in their plans.
Read the orginal article: https://www.eu-startups.com/2024/08/the-importance-of-growth-mindsets-when-scaling-in-a-downturn/
