Fintech Research

Anyone currently covering/covered fintechs before? I know growth has slowed but thoughts on the sector overall? Are fintechs valued like other banks/insurance co or like traditional software companies? Thanks

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Analyst 1 in PE - Growth

1y

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Most fintechs want to be valued like software or payments companies. So the goal is to have recurring revenue or take rate revenue models (or both). Saw extremely high multiples in 2021 like well over 20x revenue. Look at the performance of recently public fintech companies, though. Getting completely battered and some are off 60-90% from IPO price. (E.g., Hippo, an insurtech)

Multiple compression in private markets has lagged but every fintech startup internally knows they'd raise flat or down in this environment. Seeing much more aggressive stipulations on term sheets like higher liquidation preference, participation, cumulative dividends etc. You’re going to see the effects of a 2023 round on these cap tables for years.

I would bet two things.

Many 'unicorns' that raised at valuations near $1B in 2021 are worth nowhere near that right now.

Companies that stayed private are going to wait on the sidelines until the IPO market improves.

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Authored by: Certified Private Equity Professional - 1st Year AssociateCertified Private Equity Pro

Works at Financial Technology Partners

1y

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