
What is a Fintech Startup?
A fintech startup is a company that uses technology to innovate and disrupt traditional financial services. These firms use software, algorithms, and digital platforms to provide a diverse set of financial products and services, such as banking, lending, payments and investments, insurance, and personal finance management. Examples of these fintech startups in Nigeria include; Flutterwave, Interswitch, Paystack, Cowrywise, Renmoney, Piggyvest, etc.
Fintech startups frequently seek to offer more efficient, convenient, and accessible financial solutions than traditional brick-and-mortar institutions. They might range from modest, early-stage startups to well-established firms with a strong market presence.
What is an Exit Strategy?
An exit strategy is a plan on how an investor sells their stake in a startup and receives a return on their investment. The exit event generates liquidity for investors who have taken the risk of backing a young company.
An exit strategy may be executed to exit a nonperforming investment or to close an unprofitable business. The purpose of the exit strategy is to limit losses. It can also be executed when an investment or business venture has met its profit objectives.
An effective exit strategy should plan for every positive and negative contingency, regardless of the investment or business venture. An exit strategy is a business owner’s strategic plan to sell ownership in a company to investors or another company. It outlines a process to reduce or liquidate ownership in a business and if the business is successful, make a substantial profit.
Importance of Exit Plan
Strategies for a Successful Exit
Choosing an exit strategy is dependent on many factors, such as how much control or involvement investors want to retain in the business, whether they want the company to continue being operated in the same way, or if they are willing to see it change going forward.
The exit strategies commonly used by startups include IPOs, strategic acquisitions, and management buyouts (MBOs). Most companies typically select an exit plan before launching a business that fits their longer-term development decisions and goals.
The various exit strategies that a Fintech startup can adopt include;
In the fast-paced Fintech ecosystem, an exit strategy isn’t an afterthought, it is a strategic necessity. Understanding these exit strategies can help fintech startups navigate their growth trajectory and maximize value for stakeholders.
[i] https://fastercapital.com/content/Fintech-exit-strategy–How-to-plan-for-a-successful-exit-and-maximize-returns-for-yourself-and-your-angel-investors.html#:~:text=your%20angel%20investors- ,1.,Importance%20of%20an%20Exit%20Strategy&text=An%20exit%20strategy%20is%20like,IPO)%2C%20or%20other%20means
[ii] https://fastercapital.com/content/Fintech-exit-strategy–How-to-plan-for-a-successful-exit-and-maximize-returns-for-yourself-and-your-angel-investors.html#:~:text=your%20angel%20investors- ,1.,Importance%20of%20an%20Exit%20Strategy&text=An%20exit%20strategy%20is%20like,IPO)%2C%20or%20other%20means
Written by Vera Enubianozor for The Trusted Advisors
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