What’s a fintech even worth these days?

It’s not news that times have changed in the world of fintech. After financial technology startups saw their fortunes rise during the venture capital boom that loosely wrapped as 2021 came to a close, they’re now suffering from a slump of a similar scale.

The damage is not unidimensional. Instead, pain around the fintech sphere is varied and multifactorial. Today, I want to run through some key data points that are jostling around my head. These include the latest from Coinbase and Klarna, where neobanks sit in the current valuation climate, and what the changing market means for venture capital dollars that poured into the sector globally during the last few years of heady private-market investment.


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The gist, as you can work out from the above, is that fintech was the hottest thing around last year, a fact that may now turn into a venture capital and startup headache.

TechCrunch reported earlier this year, citing CB Insights data, that as global venture capital funding rose to $621 billion in 2021 from a comparatively modest $294 billion in 2020, fintech investment itself rose to $131.5 billion from 4,969 deals, up from $49 billion invested into 3,491 deals in 2020.

So the money at stake here is in the hundreds of billions in terms of invested capital, and likely trillions when we consider the value of startups that raised while times were good. (Recall that Crunchbase estimates the total value of all global unicorns at $4.6 trillion, though that number likely includes some zombie valuations no longer pertinent in a more conservative investing market.)

Refreshed about the capital that went into fintech, let’s now digest the less-than-winsome news blowing off the high seas of startups building financial technology.

What’s fintech revenue worth?

As software valuations rose during the 2020-2021 venture capital peak, every company out there wanted to be a tech company at least and a software company at best. That’s because the value of software revenue, measured on a per-dollar basis, rose sharply. Every dollar of software revenue that a company could lay claim to could yield as much as $30 or $50 or even $100 in value.

So, folks worked to either build software incomes or rebrand their other revenues as such. This is an issue for many fintech companies because it has been noted recently that much of their income was not software, but instead something else that software facilitated. The two substances, however, are not the same.

Coinbase is perhaps the leading example of this trend. Its trading income was software-facilitated and, from what we can discern from its latest 10-Q filing, high margin. So why is the company trading for a price/sales ratio (its revenue multiple by another name) of under 2x?

Because Coinbase is a trading house that uses software to execute trades. That means that its revenue can scale and compress rapidly based on consumer trading volumes, potentially leaving the company with a cost basis that far outstrips its income if the market turns. And it did, leaving Coinbase with the need to yank job offers and cut staff. The market once valued Coinbase like a software-as-a-service company, with a revenue multiple that crested above 13x amid the apex of the software valuations frenzy, per YCharts data. (It did, however, trade at even richer multiples earlier in 2021 thanks in part to its growth trajectory.)

Adding to the company’s pain, Goldman Sachs cut its price target for Coinbase today, changing its rating to sell.

For other crypto exchanges that were perhaps once excited to comp themselves against Coinbase’s metrics and resulting valuation, it’s a tough time. This means that a portion of the money that went into crypto exchanges in the last few years could be effectively underwater. Not good.

Klarna is another fintech that was valued like a software company when market conditions were more buoyant than inquisitive. After snagging a valuation of around $45 billion last year, the BNPL provider has been hacking away at its value to try and find the right number for weeks now. And $50 billion was reportedly not it. Ditto $30 billion and $15 billion. The latest? Perhaps $10 billion. We’ll see if that company can close the round at that price.

If so, Klarna will have — along with Affirm, it should be said — repriced the entire BNPL startup market downward. For the myriad investments that went into BNPL startups, it’s awful news.

Next up, the host of startups out there building neobanks. They, too, are having about as much fun as a cat in a puddle. Recall that Nubank went public recently, giving us a public ticker associated with a neobank. The company has struggled since its debut. Today, Nubank’s stock rests under $4, down from its 52-week high of $12.24, per Yahoo Finance. For companies like Chime that are sitting on huge price tags, the massive decline in Nubank’s value is decidedly unwelcome. Don’t forget that Chime is merely one company in the neobanking space, albeit a large one. There are dozens more out there also suffering from the same effective repricing thanks to changing investor druthers.

We could go on, but that’s enough from the example column. Wherever we can see price movement in a particular fintech subvertical, it’s negative. And that is a wet blanket for startup fundraising generally and for financial technology startups in particular.

The upshot is that some fintech startups may have lots of cash after enjoying a hot funding market last year. Provided that their burn wasn’t nuts, private-market fintech giants could be sitting securely atop a pile of money. But if they spent like there would be more capital, they might be short on time to secure more, and thus forced to take on capital at a price that isn’t welcome. Like Klarna, perhaps.

All this means that for venture bets already placed at the high-water mark of fintech valuations, danger lies ahead.