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Peak XV, Temasek-backed Fi laying off 10% of staff to preserve cash for 2 years of runway

Ishaan Negi by Ishaan Negi
September 28, 2023
in Business, Markets, News, Tech, Trending, World
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Peak XV, Temasek-backed Fi laying off 10% of staff to preserve cash for 2 years of runway

Credits: BW Disrupt

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Fi, a neobanking startup supported by well-known investors like Peak XV (previously Sequoia’s India unit), Temasek, and Alpha Wave Ventures, recently revealed a number of strategies to lengthen its capital runway in an effort to negotiate a difficult fundraising landscape. The business, which was launched in late 2019 by Sujith Narayanan and Sumit Gwalani, has announced plans to reduce costs and lay off 10% of its workers. This article explores the specifics of Fi’s most recent actions, the company’s financial results, and the prospective effects on both Fi and the neobanking industry.

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Peak XV, Temasek-backed Fi laying off 10% of staff to preserve cash for 2  years of runway

Credits: Money Control

Challenging Times for Fi

Fi has decided to reduce its workforce by 10% in order to increase its cash reserves and survive in a funding environment that is becoming more challenging. About 30 people will be impacted by these layoffs out of the company’s 300 payroll. Following a town hall meeting on September 27 where Fi co-founder Sujith Narayanan spoke to staff members and laid out the company’s goals, this action was taken.

A Cost-Saving Approach

Fi has not only turned to layoffs but also requested senior management staff to accept pay reductions in order to overcome the liquidity shortfall and extend its cash runway to two years. The company’s dedication to maintaining financial stability in challenging times is shown in these cost-cutting efforts. Fi wants to survive the crisis and come out stronger by lowering overhead expenditures.

Shifting Focus on Revenue Generation

Fi is realigning its strategic focus in addition to lowering its headcount and expenses. The corporation plans to reduce marketing and IT costs, according to Sujith Narayanan’s announcement to the town hall. Furthermore, Fi intends to stop focusing on goods and industry sectors that don’t generate profits. This strategy change demonstrates the company’s commitment to putting its core competencies and revenue sources first.

Revenue Challenges and Growth Prospects

Fi’s recent challenges in meeting its revenue targets shed light on the competitive nature of the neobanking industry. While the company’s mutual funds product has gained some traction, it has yet to translate into significant revenue. Additionally, plans to launch investments in US stocks have been delayed due to compliance issues, and loan disbursals have underperformed. These difficulties are indicative of the hurdles that neobanking startups face as they seek to disrupt traditional banking models.

Financial Performance

Understanding Fi’s financial performance provides valuable context for its recent moves. The company reported revenues of Rs 67 lakh in FY20, followed by a modest increase to Rs 1.27 crore in FY21. However, it made a substantial leap to Rs 25.6 crore in revenue in FY22. This upward trajectory in revenue was accompanied by escalating losses, with Fi incurring Rs 9 crore in FY20, Rs 50 crore in FY21, and a staggering Rs 245 crore in FY22. The company’s financial results for FY23 have yet to be disclosed.

Investor Confidence and NBFC License

Fi’s last valuation, reaching $520 million in a funding round in July 2022, showcased strong investor confidence in the company’s potential. However, the subsequent challenges faced by Fi underscore the unpredictable nature of the fintech industry.

To bolster its position and enhance its offerings, Fi has applied for a non-banking financial company (NBFC) license, with expectations of approval within the next 5-6 months. This move signals Fi’s commitment to expanding its services and navigating the complex regulatory landscape.

Impact on Fi and the Neobanking Sector

The measures taken by Fi, including layoffs and cost-cutting, are indicative of the tough competition and financial pressures in the neobanking sector. As a high-growth industry, neobanks like Fi must balance rapid expansion with sustainable financial practices. Fi’s challenges in meeting its revenue targets underscore the importance of building a robust revenue model and managing expenses effectively.

The impact of Fi’s moves is two-fold. Firstly, the layoffs will undoubtedly affect the employees directly involved, and Fi has pledged to provide comprehensive support, including severance packages, extended healthcare provisions, and extended ESOP vesting. Secondly, the neobanking sector itself may feel the ripple effects of Fi’s actions. The industry has witnessed significant disruption in recent years, with neobanks challenging traditional banks by offering digital-first, customer-centric services. Fi’s struggles serve as a reminder of the competitive and evolving nature of this landscape.

Conclusion

The recent layoffs and cost-cutting measures announced by Fi show the difficulties neobanking startups confront in obtaining capital and maintaining financial stability. The corporation navigates the difficulties of the fintech sector as it attempts to increase its cash runway and refocus its strategy on areas that generate revenue. Fi’s actions have an impact on its personnel as well as the broader dynamics of the neobanking industry. Fi’s path serves as a useful case study for both entrepreneurs and investors in the fintech area in a sector characterized by rapid innovation and fluctuating consumer preferences.

Tags: #alpha_wave_ventures#Peak XVNeobankingSequoia
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Ishaan Negi

Ishaan Negi

Ishaan is a student at Sri Venkateswara College, University of Delhi. Throughout his school days, he has been an avid reader, writer and speaker. He has led multiple sessions concerning varying issues under his non profit organization: 'Candescentt'. With unbiased opinions and varying sources, he reports all sides of any topic relating to the tech industry.

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