The Exchange goes on a hunt to understand what a key group of fintech startups is worth — or not — worth
While banking As the world watches as US lender First Republic goes into public turmoil after its earnings report described widespread evaporation of its deposit base, the neobank startup world is also taking a beating.
Earlier this week, Revolut, a highly rated UK-based neobank, saw its appreciation drop of about 46% in the eyes of one of the lenders.
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Given that Revolut last raised $800 million in mid-2021 at a valuation of $33 billion, it stands to reason that it was probably overvalued at the time. will buy you a smoothie.
But Revolut took such a sharp valuation markdown nearly two years after it was last priced that made us sit up and take notice.
There was a time when the neobank-for-x-market was, after all, one of the most popular startup models. Tons of capital were invested in dozens of global startups looking to reinvent or at least innovate consumer and SME banking. It even led to some liquidity, including Nubank’s massive IPO and resulting 11-digit valuation.
Revolut’s revaluation raises a number of questions: How much trimming is left to do in the fintech world? And are we likely to see something similar more broadly in the neobanking startup sector?
This morning, we analyze what happened in an enterprise in the first quarter of 2023, as well as a handful of data points from F-Prime’s fintech index and subsequent reports. We then discuss the most recent neobank financial results we have and come to a conclusion about how much pain – or how little – neobanks can expect in the coming months. To work!
Money in, money out
We have fintech funding data from CB insights for Q1 2023, but it has a huge asterisk. Without additional context, funding for fintech startups increased 55% from Q4 2022, amounting to a global total of $15 billion.
The caveat, however, is that Stripe’s latest $6.5 billion raise alone accounted for more than a third of that amount. Excluding that round, the total comes to $8.5 billion, representing a 12% quarter-over-quarter decline.
That’s the big picture. Taking a closer look at the fintech cohort, we’re curious to see which categories outperformed others. Such data on private companies is hard to come by, but we have some interesting insights on public companies.