Many Fintechs Dupe Themselves into Thinking Their Product Market Fit is Real When it’s Not: Braid Shuts Down, Founder Reflects on Challengs

In 2020, Braid said that sharing money should not be hard while introducing its spin on peer-to-peer transfers and group expenses. This past week, Braid founder Amanda Peyton reflected on the collapse of the Fintech she founded, and it is a cautionary note for all entrepreneurs as to the reality of having a good idea and the difficulty in making it a success.

Braid sought to tackle a frequent issue – sharing expenses efficiently and fairly. Launching an app on both iOS and Android, Braid sought to create shared accounts for expenses that included a social interaction aspect.  By leveraging the services of open banking provider Plaid, Braid sought to incorporate a card that could be used for any of the “groups” you were part of. Free to use, Braid earned its money from the interchange fees that all card issuers incorporate into transactions.

In the blog post, Peyton noted they raised $10 million for a service where they thought they had a great “product-market fit” (PMF), a common step for those in the startup universe, and a few months later, they were “dead.”

Peyton shared:

“There are two types of product-market fit for a Fintech company: fake PMF and real PMF. Many Fintechs, including us, dupe themselves into thinking their PMF is real when it’s not. All the signs are there: enviable early traction, organic growth, and real payment volume. It’s easy to look at the numbers and say, wow, there’s such demand for what we’ve built. We’ve found our cohort of wildly passionate early adopters.”

She then explains that these early adopters were crooks – people looking to defraud.

While Braid eventually dealt with the fraudsters and experienced rapid growth – on track to process $10 million a month by the end of 2022 – it simply was not enough. Advised to raise money just when she thought she had it figured out, Peyton spills her guts and says her ego got the best of her, believing they can always raise money and valuations were justified and TAM…

“But if I really take a hard look at that moment, it was about me, and my ego. We’d processed eight-figures of payments at that point, and over the next few months, we grew consistently and fast. But venture capital is not for companies that are good, or even companies that are great. It’s for companies that are so excellent that they produce outsized returns at the right time, in the right market. We timed this completely wrong, and it hurt us.”

And then their partner bank got squirrelly, and the wheels started to wobble and then fell off. Financial services is one of the most regulated industries in the country and compliance, is really, really hard. For a minute, Braid thought they had found another partner bank, but then Silicon Valley Bank collapsed. Timing counts and some variables cannot be controlled.

It is an interesting read, and any Fintech founder will recognize many of the struggles. Startups are not for the lazy or feint of heart. The redemption to the collapse of Braid is that Peyton is planning to do it all over again and launch another startup. And that is why entrepreneurs are the most vaunted members of society, as they are the foundations of innovation and the drivers of the economy.


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