global S&P recently has reported Funding in global fintech companies was up 49% year-over-year, to $23,000 billion in the first half of 2023. Values declined, on average, 12% for seed companies and 14% for early-stage companies initial in 2022, and for emerging growth-stage and mature companies the decline was even greater, to 43% and 66%, respectively.
Even more surprising, there was also a dramatic decrease in the number of funding rounds during that time period: only 1178 investments were made – a 64% drop from the same period in 2022. In the second quarter of 2023, there were 522 closed agreements, below the 656 in the first quarter and below the 944 investments made in the second quarter of 2022.
Investor confidence was already beginning to wane in the sector: the company noted that this was "the slowest quarter on record in the last 2,5 years." Nor did the failure of Silicon Valley Bank in March help as an event that "further curbed investors' risk appetite."
The mega-rounds were also missing, those above 100 million dollars: 23 in the first quarter and only nine in the second quarter. This is a large decrease from the 55 made in the second quarter of 2022.
Stripe was one of the big achievers during the first half of the year after taking in $6.5 billion. US fintechs overall raised $12,160 billion during that time period, with S&P reporting that it was down 28%. Without Stripe's increase, "the COVID-affected first half 2020 turnover of $8bn would not have been able to be surpassed," the report says.
However, company valuations did not fare as well and actually improved, rising to $9 billion and $14 billion in the first and second quarters, respectively, compared to $9 billion in the third quarter and $8 billion in the fourth quarter of 2022.
Therefore it seems that there is evidence that the second half of the year could look better.
Ratings looking up
Regarding the evaluations, in a more positive line, pitchbook published his guide of public compensation and fintech valuation and payments of the second quarter. According to PitchBook, the share prices of newly public fintech companies have recovered faster than the broader market: they rose 21,2% in the second quarter, compared to 12,8% for the Nasdaq and 8,3, 500% of the S&P 21,2. At the same time, investors are prioritizing returns as traditional IPOs (up 13,5%) are outperforming SPACs (up XNUMX%). Specifically, PitchBook said: “Neobanks, insurtech, proptech, and high-growth payments companies are working to turn a profit, while well-funded incumbents seek M&A. A restart almost always favors the strong.” Companies that have actually seen a rise in stock price over the past year include Coinbase, Nubank, Robinhood, SoFi, Oscar Health, AvidXchange, Flywire, Remitly, Wise, Redfin, and Zillow.
Analysts James Ulan and Rudy Yang wrote: “Many financial technology companies have focused their efforts on achieving profitability, which has resulted in headcount reductions, marketing costs and other operating expenses. Some fintech companies, such as neobanks, are beginning to emerge with profitable business models. We expect investors to remain cautious in the short term and continue to look for companies on the path to profitability." Also notable was the number of M&A deals we saw in the quarter, including Robinhood's $1 million purchase of X95 and FIS's purchase of Bond, noting that "the rebound in M&A activity mergers and acquisitions suggests that lower valuations are favorable to acquirers with adequate free cash flow and sufficient cash balances.
In May we announced on TRPlane.com that "we are close to maximum pessimism around fintech." At the time, fintechs weren't doing well at all, even when accounting for the broader drop in valuations for tech companies and compared to the earlier boom in venture firms. But it seems the tide may be turning.
Latest News
Activity in the fintech sector remains very high. For example, according to the latest news, they continue to appear only in one week:
- pipe they have moved on. A spin-off company called CapStack it aims to serve as an integrated operating system for banks. Specifically, Cieplinski said that he was able to raise $6 million in funding led by Fin Capital for the startup not only before the company had revenue, but also before it had a product, or even a beta version of a product. . Now this was very common at the height of the venture boom in 2021, but much less so today. According to Cieplinski, the venture capitalists he spoke to said they had been "waiting" for someone to build what he intends to build and one even "said yes after seven minutes." It's also notable that Cieplinski had moved from his role as chief business officer to a senior advisor at Pipe in late February, a few months after the startup made headlines when the rest of its co-founders resigned at the same time amid a search for a job. new “veteran” CEO. Pipe, which had raised more than $300 million in funding and was once valued at $2 billion, was the subject of a series of allegations about its use of capital, all of which the company vehemently denied. We still don't know the full true story of what happened at Pipe, but one has to wonder: If what this company is building is so promising, why has each and every one of its co-founders already exited?
- The French start-up swile shared some revenue metrics just a year after merging with bimpli, the employee benefits division of BPCE. Swile's main product is a payment card for employee benefits, such as food stamps. In 2022, Swile generated €138 million in revenue ($153 million at current exchange rates), which includes revenue from Bimpli. And yet, the company's losses widened to 72 million euros (80 million dollars). In other words, 2022 has been a mixed bag.
- Totem who describes himself as the "the only digital bank by and for indigenous people of an area”, says that it has launched the public beta version of its digital banking application. The company says its offering provides Native Americans, Hawaiians, and Alaska Natives with "essential and affordable financial products," such as spending accounts with no monthly fees or minimum balances, as well as early access to two-day paychecks for customers of direct deposit, among others. things.
- JPMorgan hired a former SVB executive to lend to Silicon Valley startups. This follows the line of Brex with their recent hiring of an SVB veteran to serve as head of startups.
