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Starting up in a recession

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The last recession of any major size was 2008. Fourteen years ago! The iPhone had just appeared and we had just started discussions around the concept of cloud computing. Oh, and FinTech wasn’t even talked about.

Fourteen years later, FinTech is getting over $200 billion investment a year, and the world has changed a lot. But there’s an issue here. The issue is that most FinTech firms have a business model built upon growth and expansion. In a recession, that’s tough.

This year, many FinTech’s are facing their first ever cut-backs and it’s not easy. Klarna’s valuation went from $45 billion to $6.7 billion in a year, and many start-ups are being forced to lay off staff.

In 2021, fintech startups were the top recipients of venture capital globally, accounting for about 21% of dollars raised with $131.5 billion across 4,969 deals. So far in 2022, fintech startups are earning another, less favorable distinction — accounting for the third largest number of layoffs, by percentage, globally.

Jeff Kauflin at Forbes notes that:

Rising interest rates, worries of an impending recession and an abrupt slowdown in venture investment has caused fintech founders to aggressively reduce expenses. Beyond the big companies that have announced layoffs like Robinhood, Klarna and Coinbase, every corner of the fintech industry is feeling the squeeze, from investment apps and teen digital banks to back-end trading software and insurtech outfits.

Even old FinTech firms like PayPal – can they be called FinTech? – are making layoffs.

PayPal is cutting $900 million in spending this year, a total that includes a round of May layoffs.

It makes you wonder how firms are dealing with this. Most firms are run by young visionaries – a point I make often – and it is their first ever hard times.

What advice would you give to a young FinTech founder trying to survive their first ever recession?

Well, there’s plenty out there, but I guess the key thing to remember is that you need to cover the short-term but focus on the long-term.

Some start-ups will hit the wall this year, and some will be acquired. This therefore demands that companies try to protect themselves for the near term. A cash runway is important, but the focus needs to remain.

I always go back to Steve Jobs great quote:

What I told our company was that we were just going to invest our way through the downturn, that we weren't going to lay off people, that we'd taken a tremendous amount of effort to get them into Apple in the first place -- the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over.

In other words, you have to innovate out of a recession. Stay focused on customer needs and deliver what you promise. You can do all the other things – cut costs, lay off staff, damage morale and more – but that indicates that you were cost high, fat and stupid before. You should keep focus and keep the need you are fulfilling at top-of-mind. Companies that keep putting customers first will always succeed, recession or none.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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