“Very few companies are going to be able to get out in this environment.“
Logan Allin is the Managing Partner & Founder of Fin Capital, a San Francisco-based VC firm focused on B2B software across eight subsectors. Fin Capital counts Figure, Chime, and Circle as portfolio companies — along with more than 110 others. Allin was most recently Vice President of SoFi Ventures, and managed SoFi’s accelerator and corporate-development efforts.
Tariffs, White House belligerence against the Fed, and other systemic uncertainties have seemingly exacerbated a multi-year trickle of public-market exits across sectors. That includes fintech, where major brands like Klarna geared up for IPO, only to rain-check their launch once trade-war tit-for-tats threw a wrench in their plans. Fintech Nexus turned to Allin to make sense of this third wave of volatility, and to gauge whether previous bear-market strategy books offer a sufficiently relevant roadmap for this bout of economic chaos.
Note: This article has been updated to reflect clarifications from Fin Capital.
From AI’s rapid evolution to the recent tariff volatility, the investment picture has been murky; have the kinds of companies that you’ve been looking at over the past year changed materially?
Our investment box will never change. We focus on fintech software companies that are led by repeat founders and seasoned entrepreneurs. If anything, that view has hardened: direct-to-consumer and direct-to-small-business players continue to be incredibly challenged, and I think will continue to be meaningfully deteriorated in the public markets and private markets. In terms of valuation comps, performance, long-term profitability, and free cash-flow margins, really any metric you look at. If you look at exits in the last five years, 80% of exits in fintech have been B2B names, not direct-to-consumer names. We still think the flight to quality is fintech software, both in our existing portfolio and in net new investments.
In terms of just managing volatility, we’ve now managed through three cycles as a firm, and that was COVID, then the interest-rate reset, and now tariff chaos. Companies are very concerned: What is this going to mean for enterprise spend and budgets? What is this going to mean in terms of pipeline? And what is this going to mean in terms of access to capital and valuations? The comps for the public markets have gotten completely destroyed, albeit with less multiple compression in the more insulated b2b names and it is becoming increasingly difficult to access capital because the cost of capital is higher. It’s harder for VCs to fundraise because they can’t exit positions, and LPs have no liquidity at DPI – the virtuous cycle has been disrupted.
I’m curious how much you’ve been looking at secondaries as a viable, if not predominant, path for exits moving forward.
We’re significant secondary investors and as an RIA, we don’t have ownership limitations on the amount of secondary that we can execute on. We’re always buyers of secondary, never sellers – we don’t use secondary as a mechanism for liquidity, and bid-ask spreads continue to be really wide and attractive on the buy-side, and they are even wider now given the recent market volatility. We did hundreds of millions of secondaries in recent years; where we view it as the best opportunity to get to fair value in private markets. We’re typically buying out the pre-seed and seed investor who selling for structural reasons due to where they are in their fund life, typically in the extension periods.
We think this is a great time to be investing in secondaries. We think secondaries are the best way to play growth/late stage private markets. If you’re trying to invest in primaries in growth equity, good luck. It’s a total other nightmare of competition and frothiness, particularly in AI.
On the LP front – as a corollary, with the endowment world, as you saw in Yale’s announcement, the LP-led secondaries are going to increase dramatically, which means that GP-led is going to get harder. That is because they are much more difficult to negotiate with and are going to be much more price sensitive, whereas LPs, particularly in the case of endowments, are just getting squeezed from all sides now unfortunately. They’re getting squeezed by the Trump administration in terms of grant withdrawal and taxation and they are not able to get liquidity in their PE books. As a result, the only choice is to sell their PE books to secondary buyers and Yale is only the tip-of-the-spear, others will follow at scale. Frankly, if you’re able to take a longer view, it is prima facie a terrible time to sell, because unless you were in early and have a super low-cost base, it’s going to be tough for you to make money.
On the public markets, how are you thinking about IPOs and the path to exits?
Vis-à-vis IPOs, the bar was already really high in terms of metrics, with an edge towards companies that were profitable or near-term profitable, with sufficient top-line growth and enterprise value, and now that bar is even higher. Because the VIX has been elevated for multiple months, you’ve got, effectively, a buzzsaw facing public-equity issuances, and you don’t want to go public in that type of environment, because you’re just not sure how the stock is going to react in the lock-up period. There is potential to destroy a decade of value in the span of six months, which nobody wants – particularly the investors and founders.
Very few companies are going to be able to get out in this environment. We have some that we do think will get out but that’s going to require prolonged market stability.
In our research, you need the VIX down below 20 for two consecutive quarters in order to have a healthy IPO environment, meaning issuances at standard volumes. That doesn’t mean that no companies get out, but it’s definitely impeded… I do think you’re going to see some IPOs start to come back here in Q2, but the September window is going to be the busiest window of the year from our estimates as you see some tariff certainty, you probably will have had, or will have, visibility into rate cuts, and it’s going to be a clearer time to go out.
We have a growth late-stage fund predominantly focused on secondary in our existing positions. And we have a number of companies in the IPO queue today. Three of those are on file, Figure, Chime, and Circle, and we have a number of others that would like to get out this year.
You mentioned different stages of volatility, COVID being one, rate adjustments being another. What did you learn that informs your view of this tariffs “third wave”?
If you’re not profitable today and you’re still cash-burning, obviously, it’s a great time to measure twice, cut once, and cut burn. Very early on in COVID, we sent a letter to all of our portfolio companies, as well as companies that were in our pipeline. We indicated, “Our recommendation is to cut burn and cut burn now. Be sure to preserve cash, make sure you have at least 18 months of cash. If you don’t have 18 months of cash, cut to get to that level asap.”
Two is, go to customers, offer them a discount, and lock them up for two to three plus years. Go and offer, Look, we know this is a difficult time. We want to offer you a discount and in return for offering a discount, we want to increase the length of our partnership and support you long term.
And three, in that same vein, is focused on net dollar retention versus net new customers, because net new customers that you haven’t met before, aren’t in the funnel, or are in mid-funnel are going to basically put you on pause. Rotate to customer success and away from customer acquisition. One more nuanced issue in this environment is that going international is really problematic. So, if you are global in your go-to-market approach, focus on local and focus on existing customers and penetrating those further, versus trying to extend out in the market. Which means you can let go of international go-to-market resources, furlough them, or be thoughtful about how you’re looking at the rest of the universe beyond the US. We invest in the UK, Europe, Israel, LatAm, and Canada. We think the US is a much more attractive place to be investing right now than any of those other places, and that’s because of where we play, which is fintech software, AI, cyber, and digital assets, where there’s strong regulatory tailwinds and adoption.
