Article 5ZT5W Fintech Startups Are in Serious Trouble

Fintech Startups Are in Serious Trouble

by
msmash
from Slashdot on (#5ZT5W)
The higher you climb, the harder you fall -- and that spells trouble across the board for fintech startups right now. From a report: Already fintech multiples plummeted faster, and harder, than the rest of the tech sector. A chart published by a16z shows that the peak of forward revenue multiples for fintech companies was in October 2021 when it hit near 25x. Now, it's nosedived to below 5x. This is a worse slide than sectors like the cloud, according to data from F-Prime Capital. Up until 2019, fintech had been in relative lockstep with the emerging cloud index, but it ballooned in 2020 and 2021 to be way above the performance of cloud companies. But since the beginning of the year, F-Prime's fintech index has been crashing. It fell below the cloud index at the end of March. As public fintech companies are seeing their market caps shrink, it's going to be harder for private companies to justify their own rich valuations. Publicly traded Marqeta has a market cap now around $6 billion and processed over $100 billion in transactions last year. There are similar startups doing a sliver of Marqeta's volume but with valuations at or near $1 billion, Sacra's Jan-Erik Asplund pointed out -- an outsized mismatch. The trickle-down from the public market's reset hit extra hard this week. More fintech startups began to make cuts. Some might find themselves raising a down round. Of the 19 layoffs listed on Layoffs.FYI this week, nine were at financial companies. Klarna told employees it would lay off 10% of its workforce via a video message this week. "When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today," CEO Sebastian Siemiatkowski said in the video. It was rumored that the company was going to try to raise its valuation from last summer's $46 billion to $60 billion in February, but it's now facing a potential valuation cut down to $30 billion. Fast was the first to collapse, but now its rival Bolt has had to lay off hundreds. Its layoffs are a particularly nasty kind after many employees took out loans to exercise their stock options. MainStreet, which helps startups discover tax credits, already laid off 30% of its staff weeks ago. Now TechCrunch reports that it's potentially facing a 60% discount in its valuation as part of a recap.

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