Start-ups with inherently low margins will need to convince investors they can break even in a tough fundraising environment.
A renewed emphasis on profitability and scale means fintechs are battling to secure venture capital backing, and are scrambling to avoid the same fate as failed ultra-fast delivery company MilkRun.AFR Weekend
“A lot of fintechs are working towards business models that have inherently low margins because banks and a lot of financial services businesses have inherently low margins,” Mr Kirk said. “It doesn’t matter what sector you’re in ... if you haven’t got a high gross margin to play with, it’s actually just really hard to be profitable.”MilkRun closed its doors last week after it was unable to convince investors to pour more money into the start-up to reach the scale it needed to break even on its 15-minute grocery deliveries., saying “our hubs reached break even ahead of plan, proving that the business model can work in Australia at an appropriate scale”.
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