Time has changed in the world of financial technology. Financial technology companies saw their fortunes rise during the venture capital boom that ended in 2021, but are now suffering from a similar slump.
The damage is not limited to one area. Pain around the fintech sphere is not the same as it used to be. I want to run through some important data points today. 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 are included in these.
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As you can see from the above, fintech was the hottest thing around last year and may now turn into a venture capital and startup headaches.
According to CB Insights data, global venture capital funding rose to $621 billion in 2021, from a comparatively modest $294 billion in 2020, while fintech investment rose to $131.5 billion from 4,959 deals.
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.)
Let's digest the less-than-winsome news that blew off the high seas of startup financial technology.
Every company out there wanted to be a tech company and a software company at the same time. The value of software revenue went up sharply. The value of every dollar of software revenue a company claims could be as high as $30 or $50.
People either built software incomes or rebranded their other revenues as such. It has been noted recently that a lot of the income of the companies is not software, but something else that software facilitates. Two substances are not the same.
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