FinTech Winter Chills Funding, IPOs Litter Landscape
Once hot FinTechs are now facing continued pressure, especially on the funding front.
The business models have mostly been driven less by profit than by customer acquisition. And the question remains whether the cash balance is enough to get through the winter itself.
All in all, the image is muted. As reported by CB Insights earlier this month in its “State of Venture” report, FinTech funding is down 38% quarter over quarter, amounting to $12.9 billion, a multi-quarter low.
The decline is reflected by PYMNTS own data, where the FinTech IPO index so far this year is lower than 45%. In a little more detail, only two of our 40+ names are trading higher than their IPO price, and that would be Bill.com, which is up more than 250%, and Futu Holdings, which is up 122%. The rest are traded as broken IPOs, indicating how sour the markets have become.
There is a duality here. The fact that so many broken IPOs are out there casts at least some doubt that financing the next wave of FinTechs paves a smooth path to the traditional exit strategy known as the IPO, which allows early-stage investors to cash out their holdings in the same way as -be retail and institutional holders claim to build positions in their own brokerage accounts.
At least there are some pockets of enthusiasm. As noted in this space in recent weeks, JPMorgan Chase has a new platform aimed at connecting entrepreneurs with venture capital through its Capital Connect offering.
However, the general trend is one of caution. If there is one segment that could be cooled more than others, in the short term, it can be found in online ad spend, across the platforms that have advertising built in as a revenue stream, or within those that rely on ads to help bring in buyers and sellers together.
Snap is sounding the alarm here, after plunging last week in the wake of earnings that showed growth slowing to largely zero (per guidance), following a quarter that showed 6% growth, a marked decline. Macro concerns dominate, Google and Meta will weigh in this week on their own view of the advertising decline, which again points to how end-cap companies view their business prospects. Some of the firms in the FinTech IPO group, such as Opendoor, make money through a multi-channel strategy that partly relies on advertisements (to get properties in front of would-be buyers).
