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Apr 09, 2020

Our Green Shoots session on 9 April featured seasoned founders from around the world: Prajit Nanu (Co-Founder and CEO, NIUM) and Matthias Kroener (Founder and former CEO, Fidor Bank). Shining the spotlight on their resilience as founders, our speakers shared how they are navigating tough choices, the advice they received and their own experiences of running a business in a COVID-19 world. We were also joined by MAS Chief FinTech Officer Sopnendu Mohanty who shared about the COVID-19 Support Package for Singapore FinTechs, announced by MAS on 8 April 2020 to help sustain ongoing sales and ongoing operations during these difficult times.


Here are some resources from the session:

  • Details on the COVID-19 Support Package for FinTechs: here.
  • Q&A with Speakers: below
  • If you missed the session or like a replay, you can sign up for a free SFF x SWITCH Go account to watch the session under our SFF Green Shoots playlist.
  • Want more? Check out upcoming Green Shoots sessions on our SFF website here.

Let us get through this together and be stronger, when the green shoots start to appear.

Q&A with Speakers 

Question: In what way has COVID-19 affected NIUM? Would having sufficient runway be critical to the survival of your business?

Response: Prajit Nanu: So far business is stable but today the person who sends remittance or uses a card has a job. Harsh reality is that won’t be case by Q3. So though we have a runway and raising some internal round, it’s important to streamline cost.

Question: It has been mostly business-as-usual. Clients have adopted. We have adopted. A question however, is on the cash flow disruption. What is the general sense?

Response: Prajit Nanu: Market sentiment is weak. Discretionary spending will be massively impacted. So we will have to adopt based on the new reality every month as it will change. New business is important but you will see slower lifecycle.

Response: Matthias Kroener: First off all, we see the pandemic lasting longer than optimists expected, finally then handing over into a strong recession. Following the old rule of “hope for the best but prepare for the worst”, all measures must be taken to protect and improve your cash flow:

  • Reduce cost NOW! Don’t wait a day longer!
  • Focus on your core team! Maybe you
  • Stop all products/projects which might be a nice add-on but having no positive impact on your cash flow
  • Price services that might have been free of cost to your customers until now.
  • Rethink your customer base! Double check how hard your customer base is impacted by the upcoming recession.
  • If there are any processes in your company that are still “not digital”, it is now the time to come to fully “end to end digital processes!”.
  • Seek partnerships that potentially reduce your marketing spending.
  • Maybe join forces even in an more strategic sense.

It is now the time to fully re-think and pivot your business!

Question: Hi from New Zealand. I'd love to understand any experiences you've had with pivoting - what factors did you consider that made you pivot; or alternatively what factors did you consider that made you keep the status quo? 

Response: Prajit Nanu: At NIUM, we haven’t pivoted based on Covid-19, but we have gone back to focussing on Core and cutting out all experiments. We looked at where we get revenue and seeing how we can increase revenue. Cut out all experiments and talk more to your existing customers. Forget about new ones. It won’t help.

Response: Matthias Kroener: well, allow me to answer more generally: pivoting depends strongly on where you stand today. I suggest to re-think your business regarding any “compromise” you find in your value proposition, your operating model, your tech-stack etc. First start with your value-proposition and double check: Who is your customer and how much are those customers affected by the pandemic. Will you have to change your services for the existing customer base or will you need to focus on a new group of customers? Then, adjust your target operating model and eliminate all that e. g. does only cost money or/and creates no return. Also have one eye on the venture-capital market and double check the appetite there: What are concepts investors are still willing to invest in? All in all, the current situation allows you, no, forces you to end all and everything who/which is not immediately supporting your cash-flow. No more compromises.

Question: What are some of the tactical/strategic things one can do in this limbo-like-situation?

Response: Prajit Nanu: Go back to your product and see how you can refine it. As start ups we do lot of short cuts, improve on that. Improve Ops. Spend time on things which were not important earlier. But again, product is key. COVID-19 will be over but your product should be 10x.

Response: Matthias Kroener: focus – first of all – on your strength, eliminate all your weaknesses. All in all, the current situation allows you, no, forces you to end all and everything who/which is not immediately supporting your cash-flow. No more compromises. (Details see above…)

Question: How do you predict the world will be post-COVID? Will it be fundamentally different in key ways, or do you think we will go back to the way things were with just a year wiped out? From a business perspective, do you think this is purely a cash and runway management issue or is your view that it will affect business models?

Response: Matthias Kroener: The world of course will not be the same anymore, we all will carry away a certain “trauma”, hopefully only an economic trauma.

  • Even small shops now will understand how important it is that they have digital processes
  • We see way more options and opportunities for “home office”, “home sports” etc.
  • Health systems will become more expensive, because states have to invest and prepare for the next pandemic. I trust that this will not happen again like we now experienced it. At least speaking for developed countries
  • Supply chains will be re-thought, more “near shore” solutions will be implemented. The additional cost is something like a “hedge”, cost of insurance, to maintain your business once e. g. there is an outbreak again in China.
  • Re-think your value proposition and create a company that also is doing business during such a phase. Investors will ask you: How vulnerable are you in the case of a pandemic? Have a good answer to that!

Just some first thoughts…

Question: When the COVID-19 crisis is over and the economy is gradually picking up, do you think there will be an increase in FinTech consumer confidence, considering that go-digital will be the new normal for all? Does that paint a better picture for FinTech, post the crisis? 

Response: Prajit Nanu: Absolutely, we will be back with a bang! FinTech will be massive and we will reach out to more segments as I mentioned before.

Response: Matthias Kroener: All in all, digital concepts are having a clear advantage, not only because of customer behaviour but also because their employees found it easier to change to home-office. Having said this, questions of value proposition and cash flow are more relevant than ever. Concepts/Companies that represented a “nice to have” value proposition but not hard fact “need” and “cash flow” might find it difficult to get funded. That counts for all industries.

Question: How do you prioritise business activities, resourcing and planning for the future when the activity does ramp up rapidly?

Response: Matthias Kroener: first secure your cash flow!!

Question: Business models are going to be affected for lenders and buyers of capital, how would ALM for FinTechs get affected? And what approach should FinTechs take at the moment?

Response: Matthias Kroener: yes, that’s for sure, very good question. But maybe too early to give an answer. All in all I would market-participants to act more procyclical. Prices of risk will increase strongly, in particular once state support/funds will be fully spent. The longer a lock down lasts, the stronger will be that reaction.

Question: Hi Matthias, would love to get your thoughts on the current challenger banks. Most have no visible path to profitability, have negative operating margins, and barriers to entry are very low (all it takes is a payment card). Do you think this will end in a bubble?

Response: Matthias Kroener: Yes. Wouldn’t be surprised if that ends like in the fairy tale of the emperor with the new cloth. One will shout out, that the emperor is naked. Valuations today are based on “reach” and “speed of onboarding”. We will learn, that cash flow now is king and the accumulation of costumers via “adverse selection” is not creating any value. On top: Crisis always show that people stick with the established, the stable.

Question: To Prajit: Going by your point earlier, how does a founder balance their interactions with VC - knowing that it may not lead to anything and might only lead to information sharing/ leakage? You still want to be hopeful of a raise at the end of the tunnel right?

Response: Prajit Nanu: Be polite and nice, but don’t bank on them. If someone wants too many spreadsheet, trust me - he won’t fund you. At early stage, the VC is backing you and not the model.

Question: With the unsustainable central bank printing of money, the expected further growth of the gap between the rich and the poor following this crisis, the sanitary and supply chain chaos created by COVID-19, do you believe alternative value exchange mechanism like crypto currencies allowing more direct value ownership and control will play a role in the recovery and maybe the building of a new economic reality?

Response: Prajit Nanu: Great question but Crypto and Markets seemed to be linked based on the recent data. But I can see some type of crypto emerging especially for cash segment. The day I can buy bread with Crypto, that’s the day world is redefined for us.

Response: Matthias Kroener: That is a very good question and leading directly back to discussions we also had back in 2009 and 2010. Those days, we strongly did believe that nothing will be the same. However, we had to learn that a decade later, people forgot about it. Just take total debt: Looking to the US market, we see more debt than ever – and now having that lock down scenario. And yes, the amount of FIAT money now being printed and poured into the economies is scaring me on the long run, not seeing alternatives on the short.

I find it hard to predict in detail now what will happen next. I only would say now, that there are many components and observations are fully correct. Don’t forget about it, watch that development very closely and always (!!) be prepared to act in a timely manner!!!

Question: As a founder, how do you balance between cutting people costs and being ready for the recovery when it comes? For people-intensive businesses, people are the biggest cost and probably the easiest way to cut costs. How do you balance this cost cutting imperative with the ability to hire and train quickly and at scale when the recovery happens?

ResponseMatthias Kroener: First of all, it is relevant to survive. If your cost-cutting is not enough, you won’t survive. Then “recovery” is not your issue you must be worried with. Understand? Only survivors have to worry about recovery. So do not do or think of the second step once the first is not completed. Which, however, makes your question a very good one, showing the dilemma we are living in. Anyhow, try to be as less “people-intensive” as possible. That’s my major learning out of two crises.

Question: To Prajit: which new financial products do you see emerging from this crisis?

Response: Prajit Nanu: Digital insurance. Very less work has been done on that front.

Question: For founders that haven't yet raised any external capital, including seed funding and have been boot-strapping thus far - how would you go about raising funding in the current environment, or would you look to try and wait it out?

Response: Matthias Kroener: Yes, that’s a tough situation now! The other day, we discussed that companies in exactly that life-cycle might be hit the hardest. You must try to survive without investor, as I would be positively surprised if there would be one start-up investor getting active now. There is a reason for the old rule: ”Once you do not need money, you get it. Once you need it, you will find it difficult.” However, of course, you must try. Be ready for the question: How will COVID-19 impact you and how would you survive without us, the investor?

Question: To Prajit: How are you managing communication with your investors at the moment? With the unpredictability all around, how do you manage their expectations?

Response: Prajit Nanu: Transparent and Open. Frequent updates on Whatsapp group. But remember I have always raised money from people whom I can call when sh** hits the roof.  Be honest, everyone knows the market is screwed.

Question: Prajit, Thanks for sharing your response approach. Assuming you are trying to take surer bets / save cash etc.... Especially for the more mature startups like NIUM, is there also a case for this being a good time to run targeted experiments at much lower costs if you can find some clients to work with? Note: You also have new tail winds - lower salaries, lower CAC, organic increase of the digital pool.

Response: Prajit Nanu: We have a small percentage of experimentation still on. But we have killed a lot which won’t realise revenue this year. Pivot is completely different. If you think the product isn’t being bought but need to shift. Don’t hesitate if you are a young company. See Slack, it’s an awesome Pivot.

Question: We don’t seem to talking much about the customer. @Prajit: is there one single gesture from companies that can demonstrate real, unconditional care for the customer at this time?

Response: Prajit Nanu: It’s an amazing question, cutting cost is not the right answer but reaching out and providing more options is the correct answer.

Question: Following this crisis, do you think banks will increase or lower their risk appetite in particular vis-a-vis FinTechs and other non-bank financial institutions?

Response: Matthias Kroener: I am afraid yes. At least in Europe, it is that regulators are still very risk averse while politics wants the banks to send money out quickly.

Question: Prajit: during this pandemic, what do you think has been a key differentiator of your organisation's payments service versus others? (As you would know, there are many payment providers to choose from). What customer pull do you/did you identify for those who still need to make payments during this time? Also, for traditional players who still haven't fully digitalised their flows: Quickly push for it, or wait a while till COVID-19 is over, or too late?

Response: Prajit Nanu: Traditional players need to move online or die. We have done our basics right. Seamless onboarding, value product. E-commerce is still doing well, anything on content as delivery also.

Question: Related to motivation: as a startup's growth goes to near zero, how does the founder keep him/herself motivated and productive (expecting some more hacks than the clichéd ''think positive'')?

Response: Matthias Kroener: Day by day definition of (smaller) targets... but also act self-critical. Anyhow, as a founder YOU must be the one with the highest degree of self-motivation. Only if you "burn" you put others "on fire". Silly old sentence, but that’s it.  Once you might come to the point that it is "over" despite all good vision and idea, better end it sooner than later.

Question: How do you manage low or sub par performance from team members during this time? Is it best to act now or wait until the situation normalises?

Response: Matthias Kroener: Very openly! "we are all in this together" does not mean, that some relax and others do the work. It is the opposite. If you do not address that openly, you will cause frustration within your group of top-performers. A crisis like that allows and forces you to execute unpopular decisions and resolutions. Focus on the top performing key team and you will find out, how productive a smaller (and better) can operate!!! Be ready to be surprised.

Question: Could you share a couple tips and hacks for managing your teams from home?

Response: Prajit Nanu: Speak frequently, setup detailed OKRS and try video calls once a week with teams. Focus on all hands on deck to get everyone together.

Question: Different markets/people are differently affected by the virus at the moment. So, in terms of empathetically working with your team whilst keeping all of us focussed on business, it's getting difficult ... how do you manage this?

Response: Prajit Nanu: Be as open and transparent as possible. People sometime need someone to speak to. Allow them to reach out on any platforms.

Question: What kind of FinTech firms are most likely to hire in the next months? Any tips for anyone seeking a job this year?

Response: Prajit Nanu: Data, AI for sure... RegTech remains on high level. And maybe companies that are dealing with e.g. increasing non-performing loans - leveraging on AI... Just a small example.

Question: What are some NEW green shoots that COVID-19 is presenting as sort of once-in-a-generation transformative opportunities?

Response: Matthias Kroener: Maybe too early to answer that.

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