Banks Editor's Choice Fintech Trending

We Get Remote Working Already, Where Will We Get Remote Funding From?

The impact of the COVID-19 disease and its spread through the Coronavirus outbreak has shocked the world and has created unprecedented events in modern times. Following this week’s WHOs declaration of a global pandemic, Westerners are waking up to stricter regimes on travel, major events, and personal movement.

Thorough hand washing and safe distancing are now joined by travel bans and “work from home” where possible for workers in non-essential roles. We are now focused on helping to “flatten the curve” to ensure our health systems don’t collapse.

Most importantly, we are now focused on saving lives rather than ignorantly or casually accepting a higher mortality rate of our fellow humans with medical pre-conditions or of a specific demography.

Through this crisis, we need to meet our family obligations, keep our businesses running, our staff paid, our clients served, meet our shareholder obligations, and hopefully stay healthy – through what may be the biggest economic crisis of a generation if not most certainly the biggest health crisis.

Many fintechs, early stage and growth companies already get remote working. We have been doing it for years across global hubs. Often our dev teams are in a different places to our product teams and sales teams. If we operate in a big country or in global markets, we have been doing remote working by webex, skype, hangouts, and zoom for years.

The big question when a crisis of this proportion hits is not if we can function by working remotely, we can, and hopefully that will help slow down the spread of the disease. The (next) big question is where our remote funding is going to come from to keep us going?

Let us hope that like the financial crisis, this economic (and health) crisis is short and sharp like the “V-shaped recovery” in 2008 and 2009, something we can thank Ben Bernake, the then chair of the Federal Reserve and Tim Geithner, the then secretary for the Treasury, for. The Troubled Asset Relief Program (TARP) and Quantitative Easing (QE)ensured money was made available to troubled sectors and to the overall economy respectively.

Anyone working in the capital and private markets then knows how difficult it was to raise money in the second half of 2008 during the financial crisis. In this era, many startups had to endure a minimum of six to nine or more months with little access to external funding.

Things started to loosen in March of 2009 following a recovery in the stock market. Of course we need to recongize it was the financial crisis that created many new opportunities for fintechs, and 2011 and 2012 were the years new fintech startups received the lion’s share of new funding, almost three years after the crisis.

In 2008, the crisis was mainly in the “plumbing” of the financial system, brought on by excessive leverage in mortgage derivatives, and following the collapse of Lehmans, the system “gummed up” while industry and consumers carried on, albeit at a reduced capacity.

This crisis is driven by a global health threat and the economic consequences are entirely different. We are rapidly slowing down vast areas of consumer demand as well as economic output in order to slow down the spread of the disease.

As we move into uncharted territory with the full impact of COVID-19 and the Coronavirus outbreak, let us not forget about all of the innovators and entrepreneurs taking risks in the economy with little or no safety net.

It might be ok if you work for a big company or the government, but most of us don’t.

The earlier stage the company, and the shorter the financial runway of working capital, the lower the probability of survival in a sustained economic downturn. This is no different to most gig-economy jobs and mom and pop shops that rely on a regular monthly income to pay the bills and stay solvent.

In this just in time era, many citizens operate on a “short runway” when it comes to personal savings, and have significant debt for mortgages, cars and family expenses. It is one thing to have to get by on your nest egg in hard times to support your family and business, it is another to have to burn through it for a global health crisis.

The general rules of capitalism may suffice in more normal times, especially when analysts are predicting market downturns and we are have some time to prepare, but few saw this coming, and fewer forecast or made predictions about the practical economic impact that most are going to have to endure.

Like a pandemic, negative financial contagion in an economic downturn will hit the most vulnerable the hardest. Governments, capitalists and foundations alike will need to put their powers to helping with this as soon as our preemptive actions in flattening the curve are in hand.

Fintechs, innovators, entrepreneurs, early stage startups, the gig economy, and mom and pop shops are the lifeblood of the today and tomorrow’s economy. This is a collection of humans in the economy that is “too important to fail”.



Authored by Lawrence Wintermeyer


Related posts

Mastercards Girls4Tech Launches in MEA Educating Girls in Morocco

Polly Jean Harrison

Andrew Zimine – Keynote Speaker At International Payment Forum In Vienna

Manisha Patel

How to Attract New Talent for Your Fintech

Manisha Patel