Escape Plan I

October 04, 2024

focus on fintech

For the past few years, VCs have been reminiscing about the easy money that defined 2021.

The amount of money chasing deals was at an all-time high, and the hangover effects are being felt in the present.

A large driver for the influx has to do with high profile exits in 2021, particularly IPOs taking place post-COVID

From Sept. to Nov. 2021, 12 American FinTech companies went public, including:

  • toast: $20B valuation at IPO. Payments

  • Remitly: $6B valuation at IPO. Payments

  • Expensify: $2.6B valuation at IPO. Financial Mgmt. Solution

  • nerdwallet: $1.2B valuation at IPO. Banking Tech

In comparison, there have only been 3 American FinTech companies that achieved a $1B+ exit from 2022 until now.

  • Pagaya (SPAC, 2022). $8.5B valuation at IPO. Banking Tech / AI

  • Dave (SPAC, 2022): $4B valuation at IPO. Banking Tech

  • Forge (SPAC, 2022) $1.8B valuation at IPO. Private Market Platform

The results of said companies have been underwhelming:

  • toast: -48% return since IPO.

  • Remitly : -69% return since IPO.

  • nerdwallet: -52% return since IPO.

  • Expensify: -95% return since IPO.

The SPAC babies have fared just as bad, or worse in some cases. A couple of thoughts below:

  1. Rates: post-2021 saw a very high interest rate environment that made it hard for many FinTech startups to operate. Banking Tech / Lending companies rely on a lower cost of capital in order to (1) secure loans to scale and (2) extend credit. The recent half point cut has FinTech VCs alert to opportunities in select areas

  2. New Underwriting Flow: alternative credit data that allows startups to underwrite consumers better than FICO has been a hot topic for the past half-decade. AI driven data models are a related area of innovation. If VC dollars return to FinTech, there’s a higher probability of clear winners emerging in these categories

  3. Market Cycles: the amount of dollars chasing FinTech deals was unsustainable regardless of the interest rate environment at the time. Markets ebb and flow due to investor psychology; it will be interesting to see how much the rate cuts effect the sector

Investing is a popularity contest, and the most dangerous thing is to buy something at the peak of its popularity.

Howard Marks, The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor

stars & stripes

On a brighter note

Below are some of the largest American FinTech startups by private valuation

1. Stripe - $50B

  • $50B Valuation (2023)

  • Payments

  • Founded 2009

  • Fun Fact: Stripe processed more than $817B in transactions in 2022

2. Brex - $12B

  • $12B Valuation (2024)

  • Banking Tech

  • Founded 2017

  • Fun Fact: It only took 18 months for Brex’s 22 year old founders to hit a $1B valuation

3. Chime - $6B

  • $6B Valuation (2024)

  • Banking Tech

  • Founded 2012

  • Fun Fact: Chime was worth $25B in 2021.

Is it a good time to invest in FinTech?

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mainstreet media season 2

The pod is back with another slate of episodes

In our latest, we talk to Brandyn Curry, Harvard basketball legend:

  • Ranked #2 high school point guard in North Carolina behind John Wall

  • Played alongside Jeremy Lin as a freshman

  • Ranked 5th all time in assists for the Crimson

  • Played overseas as a professional for more than 6 years

  • Played in France’s top league, LNB Pro A

Brandyn currently works as a Director at Life After Notre Dame (LAND), a platform by the Shields Foundation.

Watch the preview clip here

Listen to the episode here

Headlines

  • Alexis Ohanian takes aim at Bill Ackman’s new track league. Front Office Sports article here

  • Investors are scrambling to get into ElevenLabs, which may reach a $3B valuation. TC article here

  • How autonomous vehicles are transforming the supply chain. Pitchbook article here

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