Fintech investors seem to favor later-stage deals as the sector takes a beating, recent data shows
Welcome to The Interchange! If you’ve received this in your inbox, thank you for subscribing and for your vote of confidence. If you are reading this as a post on our site, please subscribe here so that you can receive it directly in the future. Each week I take a look at the hottest fintech news from the previous week. This includes everything from funding rounds to trends to an analysis of a specific space or hot shots of a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it – and make sense of it – so you stay informed. Let’s go! — Maria Ann
I’ve had most of the past week off, so this edition of The Interchange may be a little less dense than normal. However, some observations. We’ve seen fewer layoffs, but also less fintech-related news in general. Things were generally pretty calm and not filled with as much controversy as in the past few weeks. Honestly, we’re really excited for the end of this quarter so we can take a closer look at the numbers to see how much the funding landscape has changed compared to 2021. Until then, let’s look at some recent numbers.
Fewer deals, bigger rounds – but still way down
My dear friends and co-hosts at the stock podcastAlex and Natasha, discussed the fintech funding market not once, but twice last week – here and here. Meanwhile, it felt like there was a surge in fintech-related funding announcements. This made me curious enough to turn to my old friends crunch base to get some data on how much fintech startups have raised over the past few weeks. (Remember it’s preliminary and there’s also a lag – so more deals and dollars are sure to be reported for the same time periods in the future.) I was mainly expecting the numbers to increase. And I did, sort of. Here’s what the data showed: Global funding rose slightly in terms of dollars raised, but transaction volume declined significantly last week compared to previous weeks. Specifically, Crunchbase noted that fintech startups raised $1.5 billion in 39 deals June 16-23 — compared to $1.4 billion in 53 deals the week before and $1.2 billion US dollars in 59 deals 2 weeks ago. This tells us that earlier this month more deals were closed in the early stages, while last week we saw far fewer deals but larger rounds.
We’ve seen a similar trend here in the US. According to Crunchbase, fintech startups in the United States raised $400 million in 10 deals from June 16 to June 23. This compares to $300 million raised from 14 deals the week before and $300 million total from 17 deals 2 weeks earlier.
But what is remarkable, and perhaps even more amazing, is the difference between these numbers compared to June 2021. Globally, fintech startups raised a total of $8.2 billion from 272 deals from June 1-23, 2021. That’s a total of $4.2 billion from 151 deals in the same period this year. Meanwhile, US-based startups raised $1.9 billion in 101 deals from June 1-23, 2021. That compares to a total of $1 billion from 41 deals in the same period this year. Wow. That’s almost half of the dollars raised both worldwide and in the US. While this is just a small snapshot, it still points to what we all know is happening – a global slowdown in funding and proof that fintech is not immune.
For the record, Crunchbase defines fintech as companies that integrate technology into the financial services sector.
Bottom line: Fewer funding deals are being closed in the fintech space and, at least in June, investors seemed to be taking more bets on later-stage companies, so the dollars raised actually increased during the month. This means early-stage companies are likely to find it increasingly difficult to attract venture capitalists, who are reportedly doing more due diligence and demanding more traction than they did in the hurricane of 2021.
Photo: PM Images/Digital Vision/Getty Images
Buy now, pay later (BNPL) market, which is estimated to be worth US$120 billion in 2021, has grown significantly in recent years. But for most of its rise to virtual checkouts, BNPL has largely focused on everyday consumer goods like clothing from Urban Outfitters or a Peloton. Now the credit method is moving beyond its e-commerce roots. In recent months, large companies have entered the BNPL market, hoping to quickly unblock consumers for installment loans as well. Rebecca Szkutak interferes here.
Speaking of BNPL, Sweden’s Klarna has (finally) has introduced a new loyalty card function in its app, which allows users to store and access all of their physical loyalty cards as digital versions, eliminating the need to carry physical cards with them when shopping in-store. The company is clearly working to increase the number of its users, considering its valuation has reportedly been cut from $45 billion to $15 billion, a cut our own Alex Wilhelm sees fit.sufficiently steep.”
Scoop: Three other executives of the digital mortgage company Better.com resigned, I reported last week. These three executives are Jillian White, General Manager of Better’s subsidiaries known as Better+, consisting of Titles/Billing, Insurance and Home Inspection departments; Megan Bellingham, senior vice president of sales and operations; and John Moffatt, who served as vice president of sales.
Brex exhibited a mea culpa this week following its shocking announcement last week that it would stop working with SMEs. Pedro Franceschi, founder and co-CEO, addressed the stumble in a blog post simply titled “About Last Week’s Announcement.” In the mail, Franceschi expressed regret about the “poor job of explaining this decision, which has undermined some of the valuable trust” Brex had built over the years. He also outlined the criteria a company must meet to qualify as a Brex customer.
Speaking of Brex and SMBs, Tillful – a free business lending app built by VC-backed startup Flowcast – announced last week that it is rolling out a new feature for its users a direct partnership with Experian in an effort to better inform the creditworthiness of companies when lending to SMEs/SMEs. The startup claims it’s a “best-in-class partnership” between a fintech and a major credit bureau “to make credit risk assessment more ‘open’.” Flowcast has developed AI-based lending models for lenders and is backed by ING Ventures and BitRock Capital. Since Tillful was startedstates that over 50,000 small businesses have signed up to help manage and build their business loans.
Here’s where it gets even more interesting, given recent news from Brex: Flowcast’s latest move, a spokesperson told TechCrunch, reflects the “doubling of SMBs.” Brex, this spokesman added, is actually one of its partners, but Flowcast “hasn’t heard from them in a while as they stopped dealing with the company months ago.” They get Time Brex cardholders and lender partners, but we’re abandoning their platform and going to use our own card instead.”
Meanwhile, Mercury — a digital bank that caters to startups — claims that it’s already seen hundreds of new accounts on its platform since Brex was announced, and that it’s “seeing more every day,” a spokesman told TechCrunch on June 24.
Brazilian digital real estate agent QuintoAndar launched in Mexico City last week, the first time the startup has expanded from its home country. It will operate in the country under the “Benvi” brand, which will be the international name of the proptech. Last August, QuintoAndar announced that this was the case Raised $120 million at a valuation of $5 billion. In April the company 160 employees laid offor 4% of its workforce – making it one of the few highly valued Brazilian startups to cut jobs.
Speaking of LatAmBrazilian digital bank neon has announced that it has hired a Silicon Valley tech veteran who has worked as the new chief technology officer at Google, Snap and Coinbase. Other Madeira is the former co-founder and CEO of Meemo, which was acquired by Coinbase last year.
Photo credit: Leaked Meeting Recording/Better.com (TechCrunch)
Financing and M&A
Seen on TechCrunch
Well, that’s it for this week. Thanks again for reading – enjoy the rest of your weekend! Until next time. xoxo, MaryAnn