Dima Kats, Founder & CEO, Clear Junction, recently shared his views and insights with Crowdfund Insider.
In April this year it was reported that Fintech funding dipped to a new four-year low, with only $7.3 billion invested in the sector globally during the first three months of the year (according to the latest State of Venture report from CB Insights).
The most recent figures suggest that activity across the market dwindled, with just 904 deals made in Q1 2024, the fourth lowest recording since the pandemic began, with a deal average of $11.1 million.
While the sector struggles to attract the same level of investment it previously enjoyed, fintech companies are still faced with the challenge of securing VC investment – a significant milestone for any fintech.
An often-overlooked solution is bootstrapping, including financing through early product sales, which offers undeniable advantages. Entrepreneurs who bootstrap fintech ventures retain control, positioning themselves for stronger leverage with professional investors, as well as achieving incremental progress pre-funding which enhances valuation and terms.
While challenges do exist with bootstrapping, navigating them strategically paves the way for sustainable growth and success in fintech. One entrepreneur who bootstrapped his company is Dima Kats, Founder and CEO of Clear Junction, the UK-headquartered global cross-border payments solution leader.
Founded by Dima and funded by bootstrapping, Clear Junction’s revenue has grown to 35 million EUR in five years and is expected to triple in three years. It was also recently honoured in the 2024 FT 1000, a prestigious ranking of Europe’s fastest-growing companies, as well as achieving an impressive 140.5% average growth rate between 2019-2022.
Our conversation with Dima Kats is shared below.
Crowdfund Insider: What is Clear Junction, and what inspired you to set up the business?
Dima Kats: Clear Junction is a UK-based global payments solutions provider headquartered in London. In 2017, I relocated my family from Tel Aviv to London to launch the company. My vision was simple – to create a business that could act as a way to clear payments and a junction between participating payment institutions to ease the payment transaction flows.
Before Clear Junction, I was working various roles for payment, fintech, and financial sector clients including some consulting projects. It became clear to me at some point that they didn’t need my advice in building banking relationships for them – they needed access to more banking services and payment rails. I saw that my clients were suffering from a lack of financial inclusion, something which doesn’t just affect individuals – many licensed financial institutions and businesses also have a challenge to secure reliable banking relationships.
There are many reasons for this. It sounds strange, but in fact many banks, being typically conservative, are reluctant to work with other banks due to risk considerations, and smaller or non-EU banks are left locked out of access to payment networks and infrastructure in Europe and the UK.
Without access to these networks, these smaller financial institutions may struggle to provide their customers with the same level of service and connectivity as larger banks. Other challenges include high foreign exchange fees and transaction costs, and long settlement times, meaning payments can take several days or more to reach their intended recipient.
Clear Junction’s mission is to address the chronic underservice and unbanked status of these institutional segments with access to banking and payment solutions that have traditionally been challenging for them to obtain.
Crowdfund Insider: Why did you decide to self-fund and bootstrap the business yourself?
Dima Kats: It just happened. I was inclined to raise some money but there was always an immediate goal in front of us which we could achieve without any external funding. So we pursued those goals one by one until we found ourselves breaking even. We ended up becoming a completely different story from anything else in the market.
I launched Clear Junction with a budget of several hundred thousands, comprising my own savings and the rest coming from my consulting business. Even with a launch budget much lower than competitors in this space, we soon secured our first client and kickstarted our growth.
Crowdfund Inside: Did you ever consider external funding to grow the business more quickly?
Dima Kats: Of course I did. In the aftermath, I’m glad I selected to focus on building our operations and not on the investor relationships.
Crowdfund Insider: By going it alone and bootstrapping, did you encounter more challenges along the way? If so, how did you overcome them?
Dima Kats: Bootstrapping isn’t for everyone. It’s tough, stressful, and the vast majority of bootstrapped businesses fail. If you’re an entrepreneur and your business has been funded, you will grow and learn if it fails – and it’s your investor who loses. When you bootstrap, if you fail it’s you who pays.
Bootstrapping Clear Junction by myself would inevitably throw challenges and obstacles into my path, but I knew that by navigating them strategically, I could pave the way for the company’s sustainable growth and success.
To do that, I devised a practical roadmap, designed to enable the business to advance in small increments without the need for external funding. This meant I could focus 100% on running the business and not be distracted by having to manage outside investors. The results of this approach speak volumes. Our firm focus on organic client growth and service expansion has enabled Clear Junction to bootstrap its way to €35 million in revenue over five years and serve more than 400 clients worldwide.
Our ability to meet urgent market demand has seen us grow to a team of 130 people, expand to mainland Europe including Poland and Latvia, and become one of Europe’s fastest growing companies, as evidenced by our inclusion in the Fintech Power 50 list and the 2024 FT 1000 – a ranking of Europe’s fastest-growing companies for achieving a 140.5% average growth rate between 2019-2022.
Crowdfund Insider: What’s been the hardest part of your bootstrapping experience so far?
Dima Kats: While bootstrapping has meant that I get to truly own every success that my company achieves, it has come at a high personal cost. I’ve had to sacrifice a lot of time with family and friends.
As a founder-owner, I am responsible for everything that happens in the business. I’m hands-on and heavily involved with the day-to-day operations of the business across several departments, including sales, client relationships, service development, compliance obligations and technical performance.
But I wouldn’t have it any other way. I truly enjoy seeing the company grow and I’m exceptionally proud of everything that I and my fantastic teams have created.
Crowdfund Insider: What’s your view on the state of Fintech funding, and the prospects for bootstrapping in the current economic environment?
Dima Kats: While the sector struggles to attract the same level of investment it previously enjoyed, fintech companies are still faced with the challenge of securing VC investment – a significant milestone for any fintech.
An often-overlooked solution is bootstrapping, including financing through early product sales, which offers undeniable advantages. Entrepreneurs who bootstrap Fintech ventures retain control, positioning themselves for stronger leverage with professional investors, as well as achieving incremental progress pre-funding which enhances valuation and terms.
Crowdfund Insider: What attributes does a business founder need to have if they want to bootstrap their own business?
Dima Kats: You definitely need resilience, and lots of it. You also need the foresight and patience to understand that business growth is not a linear journey, there are peaks and troughs, unexpected bumps in the road, and setbacks along the way.
You also need to be adaptable. That doesn’t mean changing your vision for your business, but maybe explore different ways to achieve it. Sometimes you have to take a step back and look around to move forward in the right way.
Being adaptable also means you stand a much greater chance of navigating unforeseen challenges, like new regulations or recruiting the right people for your company. Bootstrapping and entrepreneurship in general require lots of compromising. That’s not for everyone.
