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Kimberly Ofori Unveils Secrets to Startup Success Amidst Investment Chill
Embrace the chill of the 'funding winter' as The MoneyPot discusses how startups are navigating the investment landscape with the seasoned guidance of Kimberly Ofori, Partner & Director, Dutch New Narrative Lab. We are setting the stage for Money20/20 in Amsterdam as we dissect how the frosty financial climate fuels a meticulous approach to due diligence and the rise of fintech resilience. Ofori, a maestro of sustainable business models, shares how bootstrapping has become synonymous with success, offering keen insights into prudent investment strategies that weather economic storms and attract savvy investors looking for true value.
Venture with us through the transformative era of European fintech, celebrating trailblazers, like Klarna and Revolut who thrived in the wake of regulatory reform. We scrutinize the shift from investor-founder dynamics to a landscape where solving real-world problems trumps technological bells and whistles. In an ecosystem that beckons for authenticity, we stress the pivotal role of transparency in investor communication and the profound impact genuine AI integration can have on a startup's competitive edge. Join our conversation for an in-depth look at how fintech is evolving and what it truly takes for startups to capture an investor's interest beyond the buzz.
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Ian Horne:Welcome to the Money Pot. I'm Ian Horne, the EU Head of Content at Money 2020. If you're familiar with our work at Money 2020 and you should be you'll know that we have an epic show in Amsterdam coming up. So for these next four episodes, we're going to discuss the big topics that will light up our stages at the RAI, and today we're going to go in on Europe's challenging funding environment and how startups and founders can navigate it. We have a really awesome guest for this. I can't wait to introduce her, but first there's another awesome person who I need to introduce Sheryl Chen, Asia Head of Content at Money 2020. Say hello.
Sheryl Chen:Hello.
Ian Horne:Hey,S heryl. Sheryl, this topic should be big in Asia during our Bangkok show and every indicator suggests that FinTech investment is tight in Asia right now. What are founders telling you?
Sheryl Chen:So, while it is true that we are in the midst of funding winter, as with everyone else, that's globally facing it, and this winter, I would like to add, is not just impacting startups, but also VCs with their fundraising, with their LPs. However, a very optimistic data point is that in 2023 last year, southeast Asia VC dry powder actually hit a record high at USD 27.3 billion, and the market is also going through valuation correction and it's really not just all doom and gloom. The VCs that I speak to tell me that this is actually the best time to invest and look for diamonds in the rough. And while it is harder and a due diligence process might be longer, but the founders of good startups continue to raise funds and close deals with some of the best in class VCs.
Ian Horne:That's actually really interesting because when we talked about this before, Sheryl, I specifically armed you with negative numbers and stats, so you brought some positivity and I rate that. Thank you, it's good that we have that.
Sheryl Chen:You tried to push me down.
Ian Horne:I tried to push a narrative and you were having none of it, and I rate that so much. Anyway, Sheryl, great to have you with me. I think we need to meet today's interviewee, which is Kimberly Ofori. Kimberly, welcome to the Money Pot.
Kimberly Ofori:Thank you so much for having me, Ian and Sheryl.
Ian Horne:Great to have you here and I'm going to put you on the spot before we introduce you properly. If you could pick three words to describe the FinTech investment landscape in early 2024, what would those words be?
Kimberly Ofori:It will be consolidation, it will be roadmap to profitability and it would be stable growth.
Ian Horne:Gotcha, you've kind of broken the three words rule, but I take your point. I don't think you can really condense it. I think that's reasonable. I'll allow it on this occasion. Anyway, time to get serious, which, as you can tell, isn't my usual setting. Kimberly, when I was drafting this episode, I immediately knew that I wanted you specifically to feature on it. I think our listeners will understand why once they learn more about your work. Could you give us a quick overview of your career history and what you do now?
Kimberly Ofori:Yes, absolutely. I went from being a banker to a consultant in the Middle East before I became a tech founder. After exiting my last startup, I started an agency focused on providing strategic support to technology companies looking to scale their operations, and internationally. Over the past six years, I've been working on developing different platforms and avenues to connect founders from all backgrounds and around the world to capital. That falls under the work that I do with Future Ventures, but not just capital. I also connected them to the broader spectrum of resources founders need to succeed, like network coaching and access to expertise.
Ian Horne:Brilliant answer. I love that you've got experience on both sides of the fence as well, both as a founder and also on the consulting side of scale-ups. I think that gives us a really good perspective for today's episode.
Sheryl Chen:Kimberly, I really liked the fact that you talked about connecting founders to resources. As an investor with the platforms that you have built, we all know that the real value that a VC provides is more than just capital, but also the networks, connections, other resources that they bring to the table. I also wanted to drill into another point. Actually, we all know that investors aren't as bullish as they have been in the previous years. We can talk about that for days. We have data to talk about investor sentiment and things like that. Instead, let's discuss what that means for startups and the scale-ups that you work with. Are startups adapting their business models to attract funding or even looking to secure a longer-term existence without it?
Kimberly Ofori:Yes, I think that there are a couple of things happening.
Kimberly Ofori:To your last point yes, startups are definitely adapting their business models to make sure that they build in very early on a sustainable business models, right.
Kimberly Ofori:So can they prove earlier on in their building space that there's a demand and that they will be able to sustain themselves?
Kimberly Ofori:This is something that we've seen change quite rapidly, for, even looking at just as recently as those startups being built during the COVID period right, where we had this wild spring of companies being built and scaling because there was such a demand for people to take back control of their finances on a more personal level, so we had a lot of smaller startups who were focused on a very niche problem sometimes and maybe had one functionality that worked very great but didn't have the scalability to really conquer entire markets and also be sustainable in that. So we do see that and at the same time, there's also now room for those who have already been building companies in that way, right. So if we're looking at companies who have been bootstrapping for longer periods of time, this is now very interesting from them because they already have the traction, they probably already have a proven business model, and so now raising becomes more interesting for them because the VCs are putting those lenses on and saying, hey, who can we invest in that can give us a sureer path to our returns?
Ian Horne:Yeah, and that's quite interesting because you work with a lot of fast-growing companies and for years we've seen companies scale fast, spend big and then either IPO or at least continue to attract investment in a big way, because obviously the IPO path is getting longer and longer. But are companies still trying to do that or have they gotten a bit more realistic with their approaches?
Kimberly Ofori:So I want to say most companies are becoming more realistic, but the overall sentiment is still this that scaling fast is still sexy, right, it's not going to become unsexy overnight. The difference is that now we're seeing more pathways to growth and we're seeing more examples of companies succeeding at IPO in a more healthy fashion. So I think that's the biggest difference. So, the companies that I particularly choose to work with whether it's through consultancy or connecting to capital, the companies I look to work with they are looking to be that 600 to maybe $1 billion or pound euro company, but they're also being realistic on how they will get there and they're not looking to be a company that will continuously need to raise in order to do that.
Kimberly Ofori:And I think this is the biggest difference, because, also, what we need to remember is that there's a reason why we've had bubbles over time, right, so we had the dot com bubble and then, like FinTech is also kind of reaching some heights that are questionable where, and obviously, ai is going really fast and what we're seeing is that there needs to be a strong foundation right in the business. So you can no longer show up or you can't, but I advise you not to show up to an investor conversation based on a company that cannot sustain itself over time, right? So there's a different sentiment where we're no longer saying, hey, let's pray and pray. There's a lot of capital out there. See if maybe one of them succeeds. We're really looking at how can we invest in more companies that will succeed and maybe take a bet on one or two, and that's really a flip.
Ian Horne:And the founders you work with have their expectations shifted, Because it's an interesting dynamic right. The investors want the massive returns that you get with the unicorn. The founders want to be that company. They want their company to be that company. But do you see any resistance to that narrative now from the people you work with, or do you still have to go in and say actually, like you're maybe dreaming a bit too big, too fast?
Kimberly Ofori:Yes, I know. I think again, transparency of the market is becoming is aiding to that conversation. So founders are now able to see first hand examples of it going wrong if that's the only focus you have. At the same time, they also have examples of companies who have been able to do it the other way and seeing that that's an option. So I think founders in that sense are more aware that there are different paths and they are also seeing how they can alter their business models towards that.
Kimberly Ofori:But at the same time it's difficult if you've been trained and been told for years that this is the way you're supposed to approach VCs, this is how you're going to convince them to then do it otherwise. But I think my bubble is also a bit biased in a sense that I do look for the companies who are also already thinking that way before the VC winter even happened. But even so, if I'm speaking to my colleagues who have been on that really fast growth lane for decades, they're also seeing a slight shift in the way that it's being approached. At least it's a topic of discussion now.
Sheryl Chen:So, that being said, I really liked the part where you talked about pathway to profitability, and we all know that there has to be innovative ways to reach that. We have so many various startups, so do you think investors can offer better support for innovation across Europe and other types of companies that they should place more focus on? Ian and I we were talking about the emphasis on finding the next unicorn. Like everyone all the investors they keep talking about how they're still looking for the next unicorn. Do you think there's too much emphasis on that?
Kimberly Ofori:I will always say yes to that question. I'm known to say that I think that, at the end of the day, being a unicorn cannot be the goal, right, it's not a goal in and of itself. The only reason why you should want to be a unicorn, I think, is because that means that you can impact even more people with your products and services, right? So I think it should be a result of the success that you've built with your product. It shouldn't be the stamp of success in and of itself.
Kimberly Ofori:Having said that, I think that it is still important to push companies to look for that high growth because, especially as the European market develops, we're still, compared to more mature markets like the US, lagging behind, right, in terms of innovation, in terms of really bringing out new solutions to market.
Kimberly Ofori:We're really in a space where we still are probably where the US was seven to 10 years ago when it comes to what can we build with what we have, in terms of, also, mindset, but also in terms of capital allocation. So, in that sense, vcs, I think, should push for highly valuable innovations to come to market that can give us that leapfrog effect. Right, there's this conversation happening that I've been following now over the regulations around AI and how. The EU is one of the first to start regulating AI in the way that we are and that's really going to cycle the growth of a lot of companies in the European Union versus the US now still having free play, and probably that again will give them so many years of progress over what the EU is able to do right now.
Ian Horne:Okay, yeah, Kimberly, great point, and I'm thinking now in terms of the ecosystem. Obviously, people invest for returns, that's just how that works. But do you think, if we were investing for the as an ecosystem, if we were investing for the benefits of FinTech more broadly, are there companies that we're currently looking at that are actually overlooking, or types of company that you think would attract more investment if?
Kimberly Ofori:we were thinking more holistically. Yeah, quite interestingly, I was thinking about this, so I want to actually do a little bit of a step back here, because I think the European story or journey towards where we are now is very key to kind of looking forward to what the potentials are, or the potential is FinTech story, and we take it back a couple of years. So after the 2008 crisis, financial crisis, european regulators pushed to open the market, to allow for more competition to balance out the previous monopoly large banks had across the EU, and that differs greatly from the way that FinTech in the US seen evolved after that period of time. So that allows for more fertile ground for startups to grow so fast forward. 10 years later, 2018, players like Goldman Sachs started to recognize an upward motion that they called Europe's FinTech revolution, and this is where the European opportunity became increasingly interesting, because, as we know, for any FinTech to become the global category dominator, your product needs to be to work seamlessly across jurisdictions. In Europe, we have that added advantage that you can go to a next country with a new jurisdiction and just 40 minutes sometimes drive Right. So the companies that were able to scale outside of their respective countries and across Europe understood that and now had the potential to become global players.
Kimberly Ofori:This is where we've seen you know, klarna and Revolut and Agents become really big players across the globe. So this was really an era in a space where we were opening up what we considered banking and access to financial products. So this is something that we actually were spearheading on across the globe. Looking at today's market and where we're, the opportunities that we have now, we're actually seeing that for all the big and global solutions that we were able to build, there's now also a consumer pool where we're looking. I think we should be looking more at how can we now service the everyday European versus the big B2B propositions that we've been building so far. So you see a rising number of peer-to-peer platforms that are not just for businesses. You see a rising number of bookkeeping and financial management solutions for households with software tools that were previously only accessible for businesses. So I think the big opportunity, or also underwriting, to provide different ways to underwrite credit Right. So there's this opportunity here to really focus on some of these opportunities that are going to impact the masses again.
Ian Horne:It's really interesting you say that because one of the big themes for our show this year is hyper-personalization, and something that comes up a lot is this idea of, well, how do you give B2B the service that B2C has been receiving for years? And it's kind of interesting to look at it and actually think, wait, b2c is still far from finished and there's so much more road left to run there. I'm sure we all think that. I think no one gets into fintech without wanting to improve and tweak everything that exists, but it is a different way of looking at it and quite an interesting one. I want to go back to relationships between investors and scale up and start up founders again now, because, obviously tied to economic conditions, I can imagine that puts more strain on that relationship, and I guess the question I've got for you here is do you see any shifts in relationship dynamics? Are founders looking for more support at a time like this and are investors looking for greater transparency, and how is that playing out for the people that you work with?
Kimberly Ofori:Yeah. So to your last point, I think VCs and investors are definitely digging deeper into the books. Sheryl, you also mentioned due diligence is taking longer, but there's also more checks for already portfolio companies. Are things really going as you say? So there's this heightened awareness that things may have gone south in between the period that you last spoke to each other, and there's also this, at the same time, need from founders to understand what it will require for them to maybe go for a next round right, because their runway may have gone faster than they expected and investors are now asking different questions. Even the darlings or the pearls of the portfolio are now also having to have a better story rather than just being the portfolio's favorite.
Kimberly Ofori:So that's definitely something that I'm seeing happening, and I think it's a good development, because, at the end of the day, I believe that's the way it should have been in the first place, right? You keep a tight eye on what you have and try to provide as much value as you can, and I think sometimes, especially in the capitalist society that we live in today, it's so easy to just look at hey, if it's working, if it's growing great, let's just throw more money at it. That probably will solve everything. I have seen now, and I think a lot of founders are also finding out, that sometimes the value of time definitely supersedes the value of just cash.
Ian Horne:Yeah, I think that's such a really interesting point, because marrying up the whole time thing with investor demands and people that are looking at declining returns is tricky right. I mean, do founders getting any leeway at the moment on returns or no?
Kimberly Ofori:I think it's difficult to say that across the board, right, I think they're.
Ian Horne:No, you're right, it's far too broad a question, but I guess, do you think they should be given more leeway? Do you think that would lead to a more healthy kind of funding environment?
Kimberly Ofori:I think what would lead to a more healthy environment is if we do go back to that case-by-case review of who did we invest in? What are we doing? What are we building? What is the market opportunity? Is it still the same?
Kimberly Ofori:Because a lot has changed in such a short period of time, you can't expect from the founder side that they can just pivot and adapt as fast as you may like. At the same time, I think founders can demand that the VCs think with them and not just drop them and leave them out to dry. I think I have seen some Unfortunately, fortunately there's not many, but some horror stories of VCs just ghosting founders now that they need them most. I think that's going to be a very unhealthy development. If we're going to say, hey, the VCs some of them are like we've lost so much money over the past few months, let's just ignore the ones that we don't think are going to make it versus hey, how can we flip this and look at opportunities? I think we'll probably find with that angle, you may be able to increase the odds of your returns in the end. That's what you hope, obviously.
Sheryl Chen:Love it, love it. Building a relationship, a very close working relationship with your VC and with your startup. Really like that, Kim. Actually, what would you? Because we are in the middle of funding winter, right. So what advice would you give to founders who have been trying to raise for the longest time but investment has been slow to arrive, non-existent, and I'm aware that this is a very multifaceted question and the way you can answer it's like so many fold. It can branch off into a separate podcast, but what can they do? When is it time to pivot?
Kimberly Ofori:So to your last point, I think, yes, it's going to be really important to zoom into the opportunities that have a that arise now from the changing climate and market, Because what we sometimes forget is, yes, we see, when we see maybe a tightening of a market, it's usually a response. It's usually a result of something underlying that was already happening right, and so how can you play into that opportunity? One of the things that we saw was inflation. One of the things we saw was the rise of cost of living. There's something going on there that, if your company is able to apply what you were previously doing before and tap into that wave, that's a really interesting thing to do.
Kimberly Ofori:This research that I was briefly involved with about the difference between companies that are able to scale and those that stall and one of the things that successful scale-ups do very well is they ride waves when they see them. Perfecting the art of seeing the waves coming and riding them, even if it's temporary, is definitely going to help you to overcome some of the temporary challenges that you may face while your money may be drying up. So is there a way that you can apply your software or solution to, maybe, a government entity that previously you weren't serving before. Is there a way to apply it in a different market or maybe a completely different economy? Right, that now needs your support. How can you kind of creatively think about it?
Kimberly Ofori:And a lot of investors to your first point, are going to appreciate you being that scrappy because it shows that they invested in the right founders, because, at the end of the day, businesses fail all the time.
Kimberly Ofori:It's the teams that make the company great, right, and keep them alive. So the more creative you can be as a founder to look at your solution and not be so narrow minded of how you've applied it up until now is going to help you to put you in a better position. The second thing would be, then, to, yes, have a conversation with investors in all transparency. Say where you don't see the potential anymore and then also outline how you think you can come out of it. There's nothing more, I think annoying for both parties to waste time about things that could happen right. At the end of the day, you're in a situation now, use the data points that you have. There's nothing stronger than using data in your conversations, especially today, right, where you need evidence to showcase that, yes, this is worth having a follow up conversation on, or maybe even investment in.
Ian Horne:Yeah, that's a really good point. I love the specifics and bringing data into it and also being honest when things aren't going right. I think that must be such a difficult thing to do, especially, you know, it's not just money tied up in these projects, it's passion, it's pride, it's all sorts of things I mean. More cynically, when you were talking at the start there, I thought you know, our company is just going to start saying they're doing AI. Now, you know, a few years ago, if you were struggling for funding, you say you do blockchain and you hope for the best. Are people attempting that? Do you see that, or are my being too much of a cynic?
Kimberly Ofori:Oh, it's absolutely happening. It's hilarious in a way. But also, on a more serious note, I think every company should be thinking about how we can implement and adapt AI into the business. I think I see AI as becoming a commodity really fast, and if you're not finding the way that it will work out for you, you're already lacking behind. So it doesn't have to be that it's part of your core business proposition.
Kimberly Ofori:So what some of the companies are now doing, which is really just maybe putting a chat bot and naming it nicely, but really looking at, okay, how can we utilize our competitive advantage and really make sure that AI becomes like maybe the competitive edge in that?
Kimberly Ofori:So that's already a way that you can do that, and then you don't have to sprinkle AI everywhere in all the sheets, but you can definitely talk about hey, we do see a future in even going faster towards the goals that we set out today. But I mean, there's this development of I think, everybody's mind's being blown with the possibilities. That's really a perception of the consumer side of things, because most technology companies had been using AI in some way, shape or form if it was an important part of their core business. So it's nothing necessarily new. The only thing different now is that you can say it and people understand a little bit what you mean. So and this is also a place for the venture capital side At the end of the day, they're also just human beings who have expertise in a certain space. They don't know everything, and so they may also be blown away by the potential of AI and then invest in it because it sounds cool. It happens, but it's a really small portion of the market that's treating it that way, yeah.
Ian Horne:So if you don't really do AI, then maybe get serious about it or just use chat GPT to write that letter explaining that the company's not doing very well. That might be your way forward with that. Yeah, you might want to illustrate it with some generative AI drawings, who knows. But I have a more serious question again, which is obviously Kimberley. You work with the Dutch new narrative lab, which supports entrepreneurship for all underrepresented groups in Dutch startup scene, and I guess that had me thinking, knowing that you do this, does the kind of funding downturn impact entrepreneurs equally, or is funding to underrepresented founders more or less resilient when market activity is slower?
Kimberly Ofori:Yeah, so historically, and also in this downturn, it has negatively impacted underrepresented founders.
Kimberly Ofori:So you do see a decline in investment towards women founders again and people from different migration backgrounds. I think that the most interesting thing opportunity for me that I personally want to highlight is this that these are exactly the kind of founders that have already built in sustainability in their company because they had to. These are already the companies that have a shorter track towards profitability because they had to, because they didn't get the opportunities to raise funds earlier. They already have that traction usually. So the flip side of this is that I'm hoping, also by way of this podcast past perhaps, to also kind of open up this as a way of opportunity to say, hey, these are the type of founders that we previously were, we were not looking at because whatever reason, but now we're looking for a sure bet. These are the companies that will be a sure bet if you're looking for those metrics, yeah, I think that's a really good narrative, and, Sheryl, I think you're about to say something, so I'll let you in.
Sheryl Chen:Yes, because we are actually coming to the end of the interview. One last question, one very important question as well. So a lot of our listeners they are founders and innovators, who are some are seeking funding. So let's say, hypothetically, if I were an AI, blockchain, cloud-based startup that's looking for funding from you, so what methods will it be most effective to achieving funding from you?
Kimberly Ofori:Great question. So it's interesting that you said AI, blockchain, I think cloud-based because none of that would matter to me. None of that would matter to me. There is a reason why in also my thesis and the companies that I work with I always look at the underlying problem that you're solving. So if you're, first of all, if you're solving a real problem, that's an interesting thing for me. If your solution is directly effective in solving that problem, that's interesting for me. Technology, again to me, I see it as a commodity. It's cool that you can use it for that, but at the end of the day, I'm looking to find out is this something that is really valuable? And if the value is clear, then we can have a conversation on what you need to scale that.
Sheryl Chen:I love it. I love that advice. I think we should print it on the mug and give it out at our Money 2020 Europe Cohort. So, yeah, I think that's all we have. So I would like to thank you, Kimberly, for joining us today on this episode of the Money Pot. If you want to hear more from her, Kimberly will be speaking at Money 2020 in June at the Rye in Amsterdam. We hope to see you there.
Ian Horne:And, of course, you can be part of the Money Pot at our Money 2020 shows. Please send your pitches to podcastatmoney2020.com and don't forget to follow us wherever you listen to podcasts. Thank you so much for listening.
