Currently, the valuations of 11 large private fintech startups are showing declines of up to 79%. However, some are beginning to recover and show promising prospects.
An article by Jeff Kauflin for Forbes US
In November 2021, at the height of the fintech venture capital market, Tipalti, a San Francisco Bay Area company specializing in bill payment, completed a $270 million fundraising round (247 million euros), thus obtaining a valuation of 8.3 billion dollars (7.6 billion euros).
Last summer, the company’s shares were traded privately worth $4 billion (€3.6 billion). Today, according to one estimate, Tipalti’s value is only $3.1 billion (€2.8 billion), marking a 63% decline from its peak, despite a impressive growth (3,500 corporate clients, mainly based in the United States, compared to 2,000 at the end of 2021).
Chen Amit, Tipalti’s 58-year-old Israeli co-founder and CEO, considers the current valuation of $3 billion to be grossly insufficient. However, he recognizes that the overvaluations of 2021 are no longer relevant. “We just have to accept it. «There’s no need to fight,» he says, noting that other private fintech companies, such as Stripe and Klarna , have since raised money in seed rounds. drop.
New platforms: a surge of hope despite depreciation
The meteoric rise followed by a notable decline in venture capital funding in the fintech sector raises an important question: what is the real value of these startups today? According to CB Insights, venture capital flows to the sector fell from $141 billion (€129 billion) in 2021 to $39 billion (€35.7 billion) in 2023, and many startups have strived to conserve cash to avoid raising funds at a significantly reduced value. Meanwhile, those that have reached an advanced level in their growth have delayed their IPOs, while fintechs already listed are experiencing a slowdown, losing around 50% of their value from their peak, despite recent records reached by the S&P 500 and the Nasdaq, both heavily tech-focused.
This information gap is now being filled by the emergence of new platforms such as Caplight and Notice, which generate valuation estimates based on the secondary market transactions they track through their partnerships with brokers. These estimates may also incorporate public information about discounts made by mutual funds holding shares of private companies, the prices of comparable publicly traded stocks, and other data.
Shortly after Tipalti’s fundraising in 2021, stocks began a period of decline, accentuated by the rise in interest rates initiated by the Federal Reserve in the United States. Mr. Amit took aggressive steps to prepare the company for a lean period, laying off 11% of his employees. “We knew we had to make adjustments,” he explains. Although the company maintains significant staff in Israel, San Francisco and Vancouver, when it began hiring again it emphasized lower-cost locations such as Tbilisi, Georgia. Tipalti has continued to grow: it now processes around $5 billion (€4.5 billion) in monthly payments, up from $3 billion at the time of its 2021 fundraising. (The company says retain 99% of its customers each year).
What is Tipalti’s current value?
In the summer of 2023, a Tipalti shareholder sold approximately $20 million (€18.3 million) worth of shares on the secondary market at a value of $4 billion (€3.6 billion). ), according to Oren Zeev , venture capitalist and co-founder of Tipalti. In the fourth quarter of 2023, Capital Group, one of the world’s largest mutual fund companies, valued its shares at $3.7 billion (€3.38 billion).
Currently, Caplight, a San Francisco-based startup that specializes in tracking secondary market transactions of private technology companies and provides a stock trading platform, estimates Tipalti’s value at just $3.1 billion – a a figure that also takes into account the collapse of shares of several Tipalti competitors, including publicly traded Bill, which has lost 80% since its peak at the end of 2021.
Caplight shared with Forbes its valuations for a long list of fintechs it follows. The chart below shows his estimates, for 11 of them, all large startups for which private transactions and other information available over the past year served as the basis for these estimates. evaluations. It is important to note that these are only estimates. Some of the drops in value from the valuation peak reached during the fundraising are dramatic: 79% for Klarna and 74% for Chime, according to estimates.
A falling valuation does not always reflect the health of the company
As the Tipalti example shows, a falling valuation does not necessarily mean the company is doing poorly.
Chime , a member of the Forbes Fintech 50 , maintains its status as America’s largest digital bank. Famous for raising massive funds to the tune of $25 billion in 2021 and sparking a buzz in the secondary market a year ago, valuing the company at around $8 billion (€7.3 billion). ), it nevertheless suffered a substantial drop in its value, reaching only $6.5 billion (€5.9 billion) as of March 8, a total decrease of 74%, according to Caplight estimates.
Plaid , which has been featured in the Fintech 50 for nine consecutive years, plays a key role in facilitating the connection between fintech applications and consumers’ bank accounts. It raised funds three years ago at a valuation of $13.4 billion (€12.2 billion). As its fintech clients struggled, Plaid’s 2023 revenue rose just 10% to between $300 million and $400 million (€275 million to €365 million), according to people familiar with its activities. Although San Francisco-based Plaid only allows a small number of secondary market transactions, Caplight estimates its valuation at $4.2 billion (€3.8 billion), a drop of 69 % , based primarily on secondary stock buy and sell offers that Caplight tracked. “Estimating the valuation of a private company based on secondary market data is misleading. We decline to comment on any further speculation,” a Plaid spokesperson, who also declined to comment on its 2023 financial results, told Forbes .
A critical look at the challenges and value swings in the secondary market
The valuation of companies based on secondary market data has shortcomings and attracts considerable criticism. Company boards must approve transactions, which are generally small (often between $500,000 and $20 million, or €457,000 and €18.3 million), making them less representative of the total value of the company. Sellers may be employees looking to raise funds for projects such as buying a home, starting their own business, or paying bills after being laid off. They do not always have access to the company’s financial results. Sellers also include institutional holders and large venture capital funds, although the latter have apparently begun buying secondary stocks more aggressively over the past year, seeing an opportunity to strengthen their positions on the stock market.
Another drawback: Values vary widely between high and low levels, depending on how far along the fundraising cycle a given sector is. Jim Feuille, venture capitalist at Crosslink Capital and investor at Chime, says: “In a bull market, secondary market values will always be higher than the actual value. In a bear market, secondary markets severely undervalue companies.” Other venture capital firms have reported that, on average, secondary shares sell at a 30% discount to the value they would achieve if it was a large primary funding round.
Despite all their limitations, secondary markets constitute real marketplaces where buyers and sellers agree on prices. Javier Avalos, CEO of Caplight, estimates that brokers facilitate between $5 billion and $7.5 billion (€4.5 billion to €6.8 billion) in secondary market transactions each year, and Caplight alone has expected around $1 billion (914 million euros) in 2023. Hans Swildens, founder and CEO of venture capital firm Industry Ventures, one of the leading players in the secondary market with $7 billion (6.4 billion euros) of assets under management, believes that platforms like Caplight are beneficial for investors. “There is more transparency today than there has ever been,” he says.
Notably, after more than two years of decline, some fintech valuations are starting to rise again, including major players such as Stripe, Klarna and Ramp. According to Mr. Swildens, the market appears to have bottomed out, although it is difficult to say before we see fundraising or exits from the biggest fintechs.
Here’s an in-depth analysis of each of the 11 companies, including their responses, if any, to Caplight’s assessments:
Stripe
The San Francisco-based payments giant makes it easier to accept credit and debit cards for millions of businesses operating in e-commerce. As of March 2021, it has raised funds at a staggering $95 billion (€86.9 billion). As the fintech craze peaked this fall, its value reached $195 billion (€178.4 billion) in secondary market transactions, according to Mr. Avalos. During a new round of primary financing completed last March, its valuation fell to $50 billion (45.7 billion euros), but it has since risen again. The company recently allowed all former and current Stripe employees to sell their shares worth $65 billion (€59.5 billion) in a tender offer . Caplight now values Stripe at $71.7 billion (€65.6 billion), a 10% premium to the public takeover offer. “In the Stripe secondary market, demand is currently greater than supply,” says Avalos. A Stripe spokesperson declined to comment on Caplight’s assessment.
Klarna
The buy-now, pay-later company has seen a staggering 85% fall, going from a valuation of $45.6 billion (€41.7 billion) in mid-2021 to 6. 7 billion dollars (6.1 billion euros) by mid-2022. Last year, revenue at Stockholm-headquartered Klarna rose 22% to more than $2 billion (€1.8 billion), while losses fell by 76% to settle at 252 million dollars (230.5 million euros). BlackRock recently valued its Klarna shares at $8 billion (€7.3 billion), and over the past six months, Klarna’s private shares have traded higher, reaching $9.5 billion today. dollars (8.7 billion euros), according to Caplight. The company is now reportedly considering going public for $20 billion (€18.3 billion). A Klarna spokesperson declined to comment on its IPO plans as well as Caplight’s valuation.
Revolut
The London-based digital bank, which provides bank accounts to tens of millions of registered users in the UK, Ireland, Spain, France and other countries, caused a stir when it raised funds in mid-2021, at a high valuation of $33 billion (€30.2 billion), approximately 42 times its revenue of $786 million (€719 million). euros) for 2021. Today, Caplight estimates Revolut’s market value at $15.6 billion (€14.2 billion), less than half of its peak. “We do not speculate on our valuation,” a Revolut spokesperson told us. “Since our last funding round, in which we were valued at $33 billion, Revolut’s business has continued to grow strongly in all markets across the world. »
Chime
Chime became one of the most valuable private fintech companies in the summer of 2021 when it raised funding to the tune of $25 billion (€22.8 billion). Its revenue grew about 20% in 2022 and 30% in 2023, reaching $1.3 billion (€1.19 billion) last year, according to a person familiar with its business, although it is still not profitable. During recessions, investors develop an aversion to consumer-facing startups, due to high interest rates and a tight financing market, limiting their ability to invest heavily in marketing to drive growth . A year ago, shares of San Francisco-based Chime were actively trading in the secondary market at a value of about $8 billion, according to Caplight. Its estimated value has fallen further since then, reaching $6.5 billion.
Of all the companies on this list, Chime has the lowest price consensus. Capital Group recently valued its Chime shares at $5.5 billion (€5 billion), while asset manager Alger valued them at $13.6 billion (€12.4 billion). ‘euros). A large Chime investor says he valued its shares at $20 billion late last year. According to another Chime investor, those offering shares of the neobank at $6.5 billion are likely optimistic current shareholders looking to increase their stake at discounted prices. A representative for Chime declined Forbes ‘ request for comment .
Plaid
Plaid’s software connects fintech applications to consumers’ bank accounts and helps customers prevent fraud. After the U.S. Department of Justice canceled Visa’s proposed $5 billion acquisition of Plaid in late 2020, citing competition concerns in the payments industry, the startup benefited from rapid growth of fintech and crypto transactions, reaching a valuation of $13.4 billion (€12.2 billion) in April 2021. Growth has slowed as the fintech sector has lost steam, with Plaid’s revenue increasing by about 10% in 2023, according to people familiar with its activities. While Plaid often restricts trading of its shares on the secondary market, Caplight estimates its valuation at $4.2 billion (€3.8 billion). A Plaid spokesperson declined to comment on the figure, but said using secondary market data to estimate valuations was misleading.
Brex
Like many well-funded fintechs, Brex , a seven-year-old startup specializing in corporate cards, has developed a fast-growing business. Yet the San Francisco-based company is still far from achieving profitability, contrary to what many observers thought. According to a recent article in The Information, the San Francisco-based company was still spending $17 million per month in the fourth quarter of 2023, despite its substantial funding. Brex recently said it has four years of cash flow headroom and aims to become cash flow positive by the end of 2025. The startup has raised funding for last time at a valuation of $12.3 billion (11.2 billion euros) in early 2022, and Caplight estimates its value today at $4 billion (3.6 billion euros), a drop of 67%. A Brex spokesperson declined to comment.
Chain Analysis
The blockchain analytics company uses on-chain data to trace cryptocurrency transactions, identifying scams, hacks, fraud and illicit activity. It raised funds at a valuation of $8.6 billion (€7.8 billion) in April 2022. However, the fall of FTX and the subsequent cryptocurrency bear market led to a decrease in valuations of most cryptocurrency startups, a trend that persists despite bitcoin’s recent rebound. Based in New York, Chainalysis saw its customer base grow from 200 public sector organizations at the end of 2022 to 300 a year later, but today Caplight estimates its market value at $2.6 billion (2, 37 billion euros). A representative for Chainalysis declined to comment.
Tipalti
Like publicly traded fintech Bill , Tipalti helps businesses pay bills online and manage expenses. It raised funds worth $8.3 billion (€7.6 billion) in November 2021 and increased its trading volume by 40-50% annually over the next two years. Today, Tipalti’s estimated valuation has fallen to $3.1 billion (€2.8 billion) based on secondary market transactions and the stock performance of its publicly traded competitors, according to Caplight . “I will not sell my shares for $3 billion. I doubt any wise person would do that,” says Chen Amit, co-founder and CEO of the company.
Ramp
This five-year-old New York company helps companies issue corporate cards and manage employee expenses and payments. It reached a valuation of $8.1 billion (€7.4 billion) in April 2022 and, although it increased its customer base by 80% in 2023 to 25,000 companies, it raised funds last summer during a $5.8 billion (€5.3 billion) funding round. Ramp is one of the few companies on our list that, since mid-2023, has seen increasing demand for its shares. Caplight values it today at $6.2 billion (5.67 billion euros). The company declined to comment.
Animoca Brands
The mobile gaming startup, founded 10 years ago in Hong Kong, made big bets on NFTs during the bull market, hitting a valuation of $5.9 billion (€5.4 billion) in the middle of the year 2022. However, with the decline of interest in crypto over the following year, Animoca’s value plummeted in the secondary market, now hovering around $1.9 billion (1 .7 billion euros), according to Caplight. London-based investor and Animoca shareholder Manny Stotz says he increased his stake, which now stands at more than 10% of Animoca, by purchasing secondary shares at valuations as low as $1 billion from sellers in difficulty.
Animoca Executive Chairman Yat Siu declined to comment on Caplight’s estimate, but said Animoca had raised $12 million (€10.9 million) in December 2023 through a «Simple Agreement for Future Equity” (SAFE) . This transaction allows investors to receive both Animoca shares valued at approximately $5.8 billion and Moca tokens that will be subsequently issued by the company. Tokens are the focus, according to Stotz, who anticipates a significant return between the cost of acquiring digital assets and the expected value when they are introduced to the market, likely during the second quarter of 2024.
Addepar
Wealth management software startup Addepar helps investment advisors monitor their clients’ portfolios. Over the past two years, it has increased assets on its platform by 15-25%, totaling $5 trillion (€4.5 trillion) in assets under control in 2023. The ranking member’s current valuation Fintech 50, located in Mountain View, California, is worth around $1.3 billion (€1.19 billion), according to Caplight valuations. This represents a drop of 40% compared to its fundraising in December 2021, which reached $2.2 billion (2 billion euros). Forbes received no response to its request for comment from Addepar’s spokesperson.
