Deploying $1 Billion - What's Next for Early-Stage FinTech

Speaker A: This is the fstech podcast.

Speaker B: Hello and welcome to this FSTECH podcast. Early stage fintech is entering a new era. Macroeconomic headwinds, rising consumer expectations and tighter capital markets are reshaping how innovation is funded and how success is defined. For founders and investors alike, navigating this landscape requires a sharper focus on fundamentals, smarter capital deployment, and a deeper understanding of where real opportunity lies. Today we explore how early stage venture capital firm RTP Global is investing its 1 billion early stage fund to back the next wave of fintech startups. Where they're placing their bets, how they're thinking about risk and what they look for in funders in today's cautious funding environment. My name is Silvia Yakovii, senior reporter at FSTech. And today I'm joined by Thomas Cuvelier, partner at RTP Global. Hello Thomas. Thank you for joining us today.

Speaker A: Great. Nice, uh, to meet you Silvia. And uh, thanks for having me on.

Speaker B: Thank you. I'd like to start by asking you about this 1m billion early stage fund, which is also RTP's largest fund to date. Uh, and so of course my first question is, how are you approaching the deployment of this fund in today's cautiously optimistic environment? Uh, are, uh, there some criteria or signals that you're prioritizing now that might not have been as important only a few years ago?

Speaker A: As you mentioned, this fund is uh, the largest fund we've ever raised and I think the market is quite different from uh, five years ago. And I think we're very optimistic for many reasons. I think, uh, AI is really changing the way industries are shaping up. But at the same time we're also fairly cautious. So I think for us, we're going to take our time deploying, uh, this fund. I think we are going to prioritize, uh, healthy unit economics and growth at the same time, rather than just focusing on growth at all costs, which was the case in last couple of years. And I think even though that uh, we are an early stage fund, we're still going to spend some time thinking about capital efficiency and betting on founders that can prove that they're going to manage a business in a very sustainable way and not just burn capital and try to raise more money, uh, over time. And I think a new uh, factor that we have now, uh, also in our investment thesis is we look closely at the regulation and what's happening not only in financial regulation, uh, but also, uh, in AI, broadly speaking, because that's been, uh, evolving relatively fast.

Speaker B: Yeah, regulation is definitely going to be One of the topic in our conversations later on. But looking ahead now to 2025, which fintech areas like uh, insurance payments or Regtech, uh, seem the most exciting or promising to you? And on the flip side, are there any parts of the fintech space you're avoiding at the moment and what's driving that decision?

Speaker A: I think many sectors are becoming more and more exciting actually uh, in financial services. And if you think about it, historically financial services has been quite hard to disrupt but now with AI you can build faster, you connect to more APIs, uh, and so on. So feel that the world's opened up. So we spend quite a bit of time in embedded payments, uh, specifically so we're looking at your different financial layers, especially E commerce, uh, apps. We looked at regtech and we think in Europe, Europe is a very good place to look at AI powered models in uh, aml, kyc, fraud reduction, et cetera. And insurance is quite attractive. Insurance has been historically uh, a space where we've spent quite a lot of time particularly for SMBs. We think the cycle is changing with usage based models on demand coverage, new ways to reduce losses, etc. Uh, so quite excited about insurance generally speaking. And I think in terms of the spaces that we are avoiding or cautious about, I would say crypto has always been something we've looked at cautiously. Still a lot of regulatory uncertainty, still a lot of variability in the space. So I think here we take bets on very good founders but uh, we're a little bit cautious of the space. And another area where that we watch quite cautiously, obviously it's consumer credit. I think uh, the interest rates are very different levels from what they were five years ago. So we're approaching the space with caution because the space is very crowded. There's margin compression and we feel that it's become harder to build big businesses today.

Speaker B: And moving on to regional opportunities, the fund is open to allocations globally. Uh, beyond the US and the uk are there any regions you see really breaking out as fintech hubs right now and what's making those places stand out in your view?

Speaker A: Yeah, so I think uh, one exciting geography for us is actually Southeast Asia. So we're a global fund. We have uh, quite a large team in India and this team uh, also looks at Southeast Asia. But if you think at your countries like Indonesia, Vietnam, there's a massive unbanked population, digital native consumer base and we feel that especially the middle class kind of rising and starting to use Neo banks and kind of new fintech tools. So that's Particularly interesting. So we're spending quite a bit of time. So Indonesia, Vietnam, Philippines as well is where we're spending a bit of time. And then there are markets with similar dynamics. I think it's no secret that Brazil and Mexico are uh, interesting markets and some neobanks have done particularly well in uh, those countries. And at the same time we look at cross border uh, remittance plays uh, and you can find those, you know, Southeast Asia, Latin America but also Africa. I think those are the fintech markets where we think there's, there's going to be big companies being built in the next couple of years.

Speaker B: Fantastic. And um, going back to how growing regulations are shaping the scene right now, which is one of investors favorite topics, um, how much does the local regulatory environment affect where you want to invest? And uh, are there any places where the rules make you more eager to jump in or maybe a bit more cautious?

Speaker A: I would say the controversial answer is that it doesn't really affect our investment decisions that much because we think that good founders especially at early stages uh, will find ways to navigate the regulatory environment and also regulation will change. It's evolving pretty fast but obviously there are some regulators that are very pro innovation and places like Singapore, we talked about Southeast Asia for example but some cities and countries are particularly pro uh, innovation. In Europe uh, it's unusual because um, it's a bit fragmented so you have EU wide regulations, you have uh, I would say tougher demands on reporting. So that means that we're trying to back companies that understand how to be compliant and etc. But it's not really a hurdle per se and the US is pretty open. I think it's been quite poor innovation for some time. And then obviously there are markets that have higher barriers to entry. Uh, thinking about India and China where we typically bet on more experienced operators uh, that know how to navigate the landscape. So I would say we're happy to invest in every geographies but some geographies are probably friendlier than others so we, we keep the bar very high I would say in certain geographies.

Speaker B: Yeah, um, going back for a bit on sectors and focusing our attention on more mature areas like payments or insurance as you mentioned. How are these big legacy players affecting innovation in your opinion? Are they helping push things forward or making it harder for startups to break through?

Speaker A: So funny. I think they actually are pro innovation but they go about it in a, in a quite smart way. I mean we've seen banks spinning out, uh, you know, fintech subsidiaries and venture labs And I think that's, that's quite common. So you know, our sense is that most banks want to foster collaboration and you know, kind of foster innovation, but that's also a way for them to kind of learn about what's happening in the market. An interesting trend, it's the opening of API ecosystems and looks like many organizations are actually opening your network or actually opening up the infrastructure, uh, so that fintech companies can actually build on top of their infrastructure. And that's pretty smart because uh, it's kind of forcing fintechs to uh, focus on your user experience and kind of a surface layer. So it prevents actually companies from competing on the infrastructure, which is what is the kind of source of power of those big legacy players. So there's uh, cooperation. But I would say the smart corporation and uh, being incumbent still are aware that they need to keep power and control.

Speaker B: Thank you. And um, um, talking about deal making, with all the recent macro shifts like interest rates, inflation and slower growth, um, how have these changes affected how you look at early stage investments? Have you tweaked things like valuation, due diligence and timelines?

Speaker A: I think uh, it's been two major adjustments. One is valuation discipline. We are very cautious of valuations that are out of whack with what we've seen historically. Uh, I think uh, a lot of investors tend to forget that things work in cycles. So if you pay very high know valuations today, you, you'll have to catch up. A couple of years in the market may not be as good. So we try to, to be reasonable in terms of your pre money uh, kind of valuation and entry points. Uh, I think we've also gone a little bit earlier because we felt that some series were slightly overpriced compared to where they are because there was a scarcity of them for some time. But something that's really changed as well though, it's, it's the Runway expectations. So we are stretching runways. So now when we invest in a company we definitely think about funding companies enough so that they can last at least 24 months before having to think of raising another round. Because we think things take time. And to raise a successful series A, you need to have your metrics M in order. So it's evaluation and Runway expectations have

Speaker B: changed somewhat and uh, with funding getting tighter these days, uh, founders on the other side are also facing new challenges. Do you think they're becoming more disciplined or just more cautious? And how do you work with your portfolio companies when they are dealing with down rounds or slower growth? In this tough environment I think you'll

Speaker A: find that there are two camps and I think there's a camp where founders have had a lot of success historically and they're being less cautious because they've raised great pre seed, a good seed round, et cetera. Because we're at the top of the market, especially in AI for specific AI powered models, uh, et cetera. So we see a type of founder that is being less cautious and very optimistic and we have some in our portfolio that growing extremely fast but never seen hardships. So we try to caution the founders and try to make them aware of that going to be competition, margins are going to be compressed, et cetera. So we try to uh, caution them around building sufficient Runway and plan B's uh, and building a sustainable business. And there are some, I think uh, an increasingly large group of founders who are being more cautious and they raise slightly larger rounds but more than they need. And some of them have actually planned based and even pivot roadmaps, uh, which is something I, I've seen as well. So I think founders are becoming more and more aware that money uh, is not going to be easy in the next few years.

Speaker B: Building on how AI is growing, you mentioned it a few times. Um, I was wondering, are you also investing in fintech startups that are creating AI native products? And when you look at those companies, how do you figure out if their technology and business have what it takes to stand out?

Speaker A: And last, I think we Definitely look at AI first models in FinTech and I think there's quite a lot of those and for us is we're trying to figure out whether they can build sustainable workflows. So not just we don't want to invest in models that ah, are just about productivity and cutting costs. So it's not about just cutting costs around, for example fraud detection, but it's about building an entire workflow that's vastly superior to what incumbents can do. And because incumbents, they will catch up, uh, they have big R and D investment budgets, they will see the competition coming, they can integrate AI into their products. So what we want is something different, a new way of doing things, new workflows, better ux, better user experience, stickiness. So when we look at AI powered models what we want to see is user retention, do those products stick? So that's one thing and the other thing we look at is can this product graduate from a B2C product, for example, or used by a handful of people, real enterprise products that will be deeply embedded into the infrastructure of large companies and those products, we think that they will be the ones that will replace incumbents. So that's where we spend most of our time.

Speaker B: So AI products that can be adopted by large companies that can grow and can scale.

Speaker A: Exactly.

Speaker B: And uh, from the perspective of rtp, do you see AI mainly as a tool to streamline processes or do you think it will completely transform how venture capital works? Have you deployed yourself AI for your own processes?

Speaker A: We have and I think there are massive productivity gains to be had. Uh, of course. And that's very simple, right? Uh, it's things like sourcing companies, compiling lists, doing some pieces of analysis faster, uh, collecting relevant data, competitor mapping, etc. For this. This is great for everything that has to do with collecting data and producing all types of analysis. I think what we think AI will not change is the investment process. Right. So I think uh, it's a great tool to make things faster, but we don't think it will or it shouldn't change the way we think. So we never upload a deck to ChatGPT and ask is this a good investment? So we're very cautious about those type of AI usage.

Speaker B: You use it more for data aggregation and analysis. That's backed by human supervision.

Speaker A: Yes, absolutely.

Speaker B: Thank you. Talking about the consumer's perspective, what changes in consumer expectations are you seeing that are shaping the fintech startups you're investing in? Do you think we will start to see a new generation of users who want totally different financial experiences soon?

Speaker A: Ah yes. So I think this is going to change massively. I think consumer expectations have changed uh, significantly. So I think people expect much better user experience than before. I think people expect to be able to interact with the software. People will expect to uh, interact in a very intuitive way. So not having to learn for example how software works, but the software will learn from how you think and software will adapt to you. And I think that's going to be the biggest change. I think a lot of companies won't be able to get away with poor ux, poor design and your tools are unflexible. And that I think is going to change how software is used and built. Uh, and I think that's going to be the biggest change or uh, the biggest impact of AI actually in the tech ecosystem.

Speaker B: Do you see any other features that will become a must have across startups within the next, let's say one to five years?

Speaker A: I think the ability to uh, query data is going to be more and more important. I think people will want to be uh, in control, but also interaction between other toolings. So I think now you'll have to build open software, and then all the software should be able to interact with each other. So I think that's going to be a big change in the way software is going to be built is people will demand access to their data and will want software to interact with other software. And I think that's going to be interesting because it's going to lower barriers to entry. But I think for consumer. Consumers will be big winners of the AI revolution.

Speaker B: Do you think we are already there where software communicates with software, or that will still take some time?

Speaker A: I think we're at the beginning, actually. I think the best is actually to

Speaker B: come and, uh, to wrap up our conversation. What's the most important advice you'd give to founders today?

Speaker A: I think it's simple. It's going back to basics and focusing on the user experience.

Speaker B: That's fantastic. Um, thank you so much. Well, I think that's a great note to end this conversation. Thank you, Thomas Kvilye, partner at RTP Global, for your insights and to you for listening. For FSTech, I'm Sivia Jakubi and we'll see you soon.

Speaker A: Thank you, Sivia.

Speaker B: Thank you.

Speaker A: Thank you for listening to the fstech podcast.

Speaker B: It.