This article by Jay Bhattacharya, Founder and CEO of Zipmark, was originally published at paymentssource.com.

The changes happening in digital payments today are being driven by fintech innovators improving almost every way that people and businesses exchange and manage their money.

The “Uber of X” boom is affecting every industry and innovative companies responded and achieved market share by focusing on products that serve the unmet needs of these companies. But innovative products need to be accompanied by strong distribution strategies that drive market share from incumbents and stay relevant.

A natural progression is that as the market evolves, the focus on product is joined by pressure to distribute and service customers. Running parallel to these developments in fintech are large companies with more traditional products who are struggling for growth and slow to innovate in the face of changing business norms.

In recent years the big players have taken notice of the innovations in fintech, and in a sign of maturation of the market, as well as leadership from smart executive teams, we’ve seen prominent names acquire fintech disruptors. PayPal acquired Braintree – Braintree acquired Venmo even before that – and Vantiv acquired Mercury. Going forward, we can expect that leading companies will find a way to absorb startups while rewarding entrepreneurs and investors for pushing innovation forward and opening completely new markets.

Similar to the emergence of marketplaces, we see similar first movers taking advantage of the opportunity for disruption in B2B payments and small business solutions.

These companies are shifting market share and getting the attention of companies through focused product offerings and differentiation from traditional payments through better usability, and ease of integration.

Digital payments is a massive industry that will support multiple winners and will always rely on new transformative technologies to drive the industry forward. Recent considerations are not an indication that the market is waning, but rather that is growing, becoming stronger, and opening to new competitive innovations.

Jay Bhattacharya is CEO and co-founder of Zipmark.

With all this tech bubble talk, I’ve been thinking about the last financial crisis and whether there are any commonalities. There’s one big difference– a tech bubble deflation wouldn’t be the main event. Something else will be and that will be the catalyst for a sustained tech deflation.

For example, the Bernie Madoff scandal, which happened during the crisis, wasn’t the main event. It was the bigger financial crisis that hit Madoff’s inflows that uncovered his house of cards. Ponzi schemes break when inflows < outflows (I’m not insinuating that VC is a Ponzi scheme!).  For tech, something would have to impact the inflows into venture funds or exit opportunities significantly to cause a sustained deflation. Relevant questions should be “What would cause the Nasdaq to decline sharply?” or “What would make LPs stop investing in venture funds?”.

A tech deflation that happens in containment (no systemic risk/contagion) is a feature, not a bug, of the early stage tech industry. Startups are high risk/high reward. There’s alignment among parties involved that these investments are supposed to be risky. High variance is built into financial expectations. I’m not saying this won’t be a painful process, but it’s part of the process.

The SEC said the Bernie Madoff scandal was $64B theft. Most of that were fake markups that he created for his clients (sound familiar? i.e. unicorns). This event caused a lot of pain for high net worth investors but it feels mostly contained compared to the larger financial crisis.

On a related note: Lack of debt in tech makes a huge difference. We’re not playing with borrowed money. The reason why the recent financial crisis was so painful and hard to recover from is that it largely centered around debt. Debt is more tightly coupled and it’s expected to be a lot less risky. When these stable investment products become even a little unstable, it has huge impact because there’s not a lot of slack provided for variance.

Posted by John Ryu, Partner at Scout Ventures

The world is abuzz about liquidation preferences right now so it’s really important to understand that IPOs are not liquidity events.

In multiple articles, I’ve seen writers assume that liquidation preferences protect late stage investors and effectively lock in a minimum return in an IPO. The reality is that:

In an IPO, all the preferred shareholders convert to common and this process ends up wiping out the waterfalls created by liquidation preferences

The source of this conflation is in how we define a liquidity event.

An IPO is not a liquidity event.  It’s mergers, acquisitions, and/or changes in control, etc. that are considered liquidity events.

Liquidation preferences only matter during the kind of events listed above– BUT don’t relax just yet.

The waterfalls from prefs may go away in an IPO but there are ways investors can dam up and divert some water to themselves

For example, if you look at the Box IPO, it wasn’t the liquidation preferences that protected Coatue and TPG. It was the ratchet and poison pill. Check out this EquityZen post for detail.

Given this different point of view, go back and read this old Bill Gurley piece about the benefits of IPOs vs staying private longer:

It is obviously quite ironic that the very event that many of these entrepreneurs were hoping to avoid (the IPO) becomes their only saving grace. Yet, because they did not focus on the normal steps that lead up to an IPO, they are ill prepared for this singular redemptive path.

Now, on the flip side, let’s say you’re running Uber and you have strong conviction on an IPO path. The more de-risked the path to IPO becomes, the less you should be concerned about liquidation preferences.

This post was originally published on Medium by John Ryu, Partner at Scout Ventures.