Interview with Yusuf Ozdalga, a Partner at QED Investors

Yusuf Ozdalga is London-based Partner at QED Investors with a focus on European financial technology and consumer finance companies. Ozdalga joined QED in 2017, and his career has spanned roles as an operator, advisor, entrepreneur and investor. His current portfolio of investments includes Wagestream, GetGround, Wayflyer, Fidel API and Weavr. He started his professional investing career in 2006 funding speciality finance and consumer credit companies in Europe, including early fintech plays such as some of the first online loan originators in Sweden. Prior to joining QED, Ozdalga was an Investment Director with a growth fund helping emerging companies and entrepreneurs build lasting consumer franchises by leveraging the power of data analytics.

We are living in an extremely volatile period, since Covid-19 has impacted people's lifestyles and entire economic ecosystems, changing the way the majority of enterprises operate. Fintech is no different. Yusuf Ozgalda is a board member at Payhawk, Wayflyer, Fidel API, Weavr, GetGround, Capitalise, Remoteam and Rest Less, board observer at Wagestream, ShopCircle. Former board positions include GAIN Credit and Fabeks. We talked to identify if Covid-19 affected paytechs, the way how investors do their job, and how fintech founders can overcome the challenges.

1. Payment technologies and unicorns may have been harmed as well. Could you provide a brief overview of the changes that have occurred specifically for fintechs?

Going back to basics, as a result of Covid, an increasing number of consumers started making purchases online. While some consumers shifted to e-commerce for the first time, Covid-19 and the lockdown also prompted existing users to do it more frequently. Luckily, new fintech payment technologies were here to enable these real-time online transactions. New payment solutions, helped fraud prevention and improved the customer checkout experience. In this regard, the transition has been advantageous for consumers, as it has resulted in more seamless online commerce services, and rapid adoption of new technologies.

2. Is there any way for fintechs to overcome the impediments and challenges they face?

Embedded finance is one way to overcome these obstacles., for example, assists firms in integrating various payment solutions and modules into their processes with minimal effort. Typically, integrating finance and payment solutions into corporate processes is highly challenging, as the organization requires a huge number of development resources, which are quite expensive. Embedded finance providers help firms to do so efficiently, which saves them substantial resources.

3. How is the investment flow performing? Is there any indication that Covid-19 has harmed fintechs' capital raising efforts?

With Covid, investors began investing after only having met the company's founders online, which was a big transformation. The other big development was the liquidity that was unleashed by central banks, which resulted in higher stock market valuations that then got reflected in the private markets. As a result, many fintechs found themselves in a very favorable investment environment. Moreover, the sheer number of funding rounds increased, as each round grew in size and frequency.

Looking forward, it is critical to remember that entrepreneurs must build their firms on solid foundations, including a strong corporate culture and sustainable growth. There is no reason to hurry into higher valuations just for the sake of getting a higher valuation. It is crucial to remember business fundamentals.

4. Considering all of the key issues and difficulties, what are the most essential indicators of a fintech startup's future success? What are the most critical elements to consider for investors?

When deciding which company to invest in, investors consider a variety of different factors. This list includes characteristics such as the founder's prior experience, the company's operational efficiency, corporate culture, and the business concept's long-term viability. Nowadays, startup entrepreneurs come in a variety of ages, with some being relatively young and some being older. Hence, age by itself is a less important factor than having a clear objective and collaborating with a capable set of people.

5. Do you have any advice for aspiring entrepreneurs?

Founders should be entirely candid about their prior experience and the company's financial situation, including any negative issues or difficulties. Honesty is always the best policy. If investors believe you're being open, highlighting your faults but also celebrating your successes, you'll earn their trust, which is crucial. Finally, keep in mind that honesty isn't just about pointing out flaws - it's also about emphasizing your accomplishments!

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