How fintech startups are navigating the extension rush

As ​​the fintech venture capital market evolves, so does the venture capital market itself. Why? Because fintech investments have historically accounted for about a fifth of every venture capital dollar invested, at least in recent years. And after fintech investing and venture capital itself went a bit bonkers last year, both face a new, more conservative reality.

For fintech startups, the downturn is real, and many emerging companies (we learned this in our recent survey of fintech investors) are looking to avoid de novo rounds that include new valuation (no one doesn't want to increase a turn down!) . Therefore, expansion towers are an attractive option for many founders.

But as TechCrunch reported, while extension towers are popular even beyond fintech today, there are often more startups looking for the type of tower than there are. there are checks. So, to better understand the fintech extension cycle market today, we have another set of responses from a group of fintech venture capitalists we interviewed. Here's the question we asked:

How popular are extension cycles? Do you see more companies choosing to raise extensions rather than new rounds compared to, say, 2021 and 2020?

Eight investors responded: Paul Stamas of General Atlantic, Alda Leu Dennis of Initialized Capital, Michael Gilroy of Coatue, Justin Overdorff of Lightspeed Venture Partners, Addie Lerner of Avid Ventures, David Jegen of F-Prime Capital, Nik Milanović of The Fintech Funds, Jay Ganatra of Infinity Ventures. (Their answers have been slightly edited for clarity.)

Michael Gilroy, General Partner and Co-Head of Fintech, Coatue