Last week, London-based Fasanara Capital announced a new $350m fintech and crypto fund, providing traditional equity to companies from early stage to Series A. Seed and pre-seed will typically be $500k and Series A tickets will be $5m-10m. Fasnara plans to invest in more than 50 companies with the new fund, the bulk of which are European, with a 70:30 fintech to crypto spliy. Most of its deal pipeline is already in place, and by the end of the year all the fresh capital will be deployed. We caught up with Fasanara’s CEO Francesco Filia to talk about the timing of its launch.
Why launch now?
We’re veterans when it comes to investing in both crypto and fintech — we’ve done crypto for the last five years in open-ended funds, and fintech in open ended transfers for the last eight. Our narrow focus is on fintech lending and crypto trading.
Crypto's had a difficult few weeks, just as you’re launching a new fund for the sector. As an investor, do you worry about what’s happening?
I think what’s happening right now is natural, beneficial and inevitable. It takes a bit of steam off things and will help us differentiate between the good guys and the bad guys — the companies that were a fragile construct riding the hype, and the companies that took a long-term approach as builders. Fintech and crypto are early asset classes, particularly crypto which is more or less the work of the last five years. Stablecoins themselves are a recent experiment. So it’s only natural that when there is demand there is an attack. And I think it will be beneficial later on in the medium to long-term, because it will expose the weakest branches and protocols, and leave the more robust ones for institutional adoption. The game plan for crypto has always been the same: to be recognised as a proper asset class once the regulation is available. This can’t happen across the board. It can happen only for the best projects, the best protocols, the best coins, the best gains, etc.
You’re accountable to your LPs and you have to deploy this capital. Do you think there are enough of these “good guys” out there to do so?
The vast majority of our investors are the largest institutions in Europe like pension funds and insurance companies. I think there are enough good guys out there if your ecosystem is able to capture them. We have a global footprint from our other operations and we’re able to intersect a lot of deals to pick the best ones. Also, at a moment like this you’re not in an auction environment. You have more time to cut your deals properly, to design them and to negotiate your terms, and you have fewer competitors around. There is still lots of competition for the best companies, but if you’re a long-term player, this is the ideal environment for you now.
What advice are you giving to the companies on your radar and in your portfolio about navigating the current climate?
Look for early-stage profitability. Don’t think that you can throw money to make money. Too many think that growth comes from marketing expenses but long gone are the days where you can do that; the market is more severe and judgmental. Investors want to see the business model working earlier rather than later. You need to make sure that you can skip a round or two and still survive. So the cash burn is key to watch. Think of profitability, sustainability and cash burn — you need enough dry powder for a rainy day.
It’s inevitable that you will see more failures and more layoffs in an attempt to avoid failure. This is nothing new — it’s been happening over and over again. This cycle is not over. I think there was a lot of steam to be taken off at the top. Covid just created a bubble that delayed the readjustment by a couple of years because of the liquidity injections by central banks. But at the end of the day this is just one market episode. The endgame is still intact. This cathartic moment will weed the bad guys out and make the sector more resilient. Whatever is left after is to the benefit of the end game.