Tech is booming. It’s been booming for a while and the pace doesn’t seem to be slowing. It doesn’t matter if you benchmark based on startups, funding or research, it’s a market that is surging. Every other headline seems to announce new records in the world of tech financing, that keep growing and growing in terms of scale.

We have seen a tidal wave of funding come into the ecosystem. And the cash is needed - building complex products, scaling a team and getting customers to back your service over your competitors requires deep pockets. 

FinTech is no different. There are huge opportunities for technology companies to remove friction and inefficiencies within the financial system. But to build new products, compete with incumbents, while fighting off new competitors, a strong financing strategy is key to winning in a competitive marketplace.

However, before you rush to update your pitch deck and schedule lunches with VCs and banks, it might be better to pause and think about all your options and what you can do to get the best deal. 

The first thing to understand is that the ‘traditional’ startup routes of funding - Angels, VCs, incubators and so forth - are not the only games in town. Many traditional financial institutions now offer much more flexible and startup friendly loan options. This trend has been accelerated by the pandemic and growth in self-employed workers. Then there are government and local council grants and investment programs. Although more limited in cash amount and often tied to a geographical area - they often offer incredibly favourable terms. Finally, there is the new generation of non-dilutive financing options that provide upfront access to future revenues against a fee. 

Each option has its own pros and cons - the trick is determining which option is the right fit for your fintech’s current situation and future potential. Funding in exchange for equity isn’t about getting the ‘most’ money - a bank or non-dilutive finance option could provide the tens of millions you need - instead it’s about tailoring the capital you seek with your company’s risk profile. As such it doesn’t make sense for a startup that already has clients, good growth figures and a well built product to only consider equity financing. Put simply, why would you give up some of the ownership of an already well run company if there are cheaper or faster financing options available? 

Much is written about investors providing invaluable ongoing advice. Indeed, many funds provide incredible access to strong networks and expertise. However, that does not mean that securing these services via equity financing exclusively is the only way forward. Combining an equity round with a bank loan can be an attractive option, given its low cost of capital. This makes most sense when your startup has a track record of profitability. The drawbacks are obviously that although banks have got better at assessing startups, fintechs with unproven or complex tech or high burn rates might struggle for quick approval. Repayment terms are also often quite rigid and the process can take several weeks or months. 

Non-dilutive revenue-based finance can be a particularly appealing option if a startup has a solid pipeline of predictable revenue. As such, fintechs that have a clear site of their revenue and growth for the next year are ideal candidates. Not only do you not give up precious equity, you can get access to it within days rather than months. Further, you do not need to explain or justify how you will spend the capital. Some capital providers even offer very flexible repayment terms. The drawback is that the amount of finance your startup will be able to secure will be a certain percentage of your turnover and as such may limit fintechs with particularly aggressive scaling plans. 

It’s worth noting again that this is not an either or situation - you can mix up these and other options to create a funding strategy that has the best elements that fit your ambitions. All that matters is that you do not rush but instead take the time to identify and research every available option. 

I’ve often found that securing funding is more often than not an area that infects even the most rock-solid confident entrepreneurs with self-doubt and confusion. This is because it can seem like normal economic rules don’t apply and it is more about who and what you know than what your company does. As such, identifying whether you’ve got the best terms possible for your startup can be difficult. Add in the unpredictability of a boom and you can have a recipe for bad decision making and regret. By looking beyond the ‘traditional’ ways startups get financed, an entrepreneur can be the master of their own destiny. After all, fintech is all about financial innovation - so why not apply these principles to how you fund your startup?