Sky-high valuations are so 2021. Faced with soaring interest rates and cautious investors, the overnight Fintech unicorn is back to being a myth.
Fintech firms are facing a new reality, and with it new valuations that cause headaches, create challenges, and present new opportunities.
The Decline in Fintech Valuations
According to analysts at Jefferies Group, listed Fintech firms saw their valuations plummet by 70% in 2022.
Even the biggest names aren’t immune. In early 2021, payments giant Stripe achieved a funding valuation of $95 billion, but its secondary market valuation has since dropped by 73% to $52.5 billion.
Cautious investors, cooling valuations
The changing valuations in the Fintech industry reflect the uncertain economic conditions. As interest rates rise and the global economy remains unsteady, investors are becoming more cautious and reevaluating their strategies.
Combined with the high-profile collapse of Crypto Exchange FTX and the collapse of Silicon Valley Bank in March, investor confidence in Fintech has cooled and so have the valuations.
Disaster or recalibration?
At first glance, it seems like bad news for Fintech. If valuations are down, does that mean Fintech’s heyday is over already?
Industry thought leaders and some investors see it differently, framing today’s lower valuations as a much needed recalibration.
At the end of September the European Investment Fund (EIF) held a VC event in Luxembourg. They made it clear that they see the valuations of 2020 and 2021 as the issue – anomalies – and today’s valuations have got things back on track.
New valuations, new opportunities
Decreasing valuations open up opportunities for traditional banks to enter the Fintech space through strategic acquisitions.
JPMorgan Chase, the largest U.S. lender, jumped on the Fintech acquisition opportunity early, acquiring Renovite Technologies Inc, a cloud-based payments technology company, in September 2022.
Traditional banking institutions have seen the demand for more innovative financial services. They’ve seen which startups have flourished, and now they have a chance to snap them up at a bargain rate.
Bucking the trend
Like every good trend, there are some exceptions. HR and payroll-focused firms have seen their valuations hold or even increase.
Despite the collapse of their banking partner, Rippling’s $11.25 billion 2022 valuation held steady in their recent $500M series E funding round.
HR-tech unicorn Gusto saw their valuation increase by 5% to £10 billion, and remote-working focused Deel remains one to watch as long as they continue to prioritise compliance.
Their resilience is down to their focus in an area associated with business efficiency. As companies prioritise digital transformation and remote work, the demand for streamlined HR and payroll services has increased.
For Fintech firms that can identify market trends and position themselves in resilient, growing sectors, overnight success could still be a dream come true.
Building the team
Building the right team to navigate a changing market, fluctuating valuations, and even possible acquisitions is hard.
Creating a sustainable revenue pipeline is key to achieving that all-important growth and maintaining valuations.
We only recruit in one sector, for one type of role: Fintech sales. With our talent network, we know the top fintech talent personally, taking the time to match preferences and personalities as well as job specs.
To tell us about a sales leader recruitment brief or just to chat to us about the shape of your Sales division, get in touch with the Finiti Search team.
