Fintech’s Wild Ride: From Darling to Downturn

   After basking in the limelight as venture capitalists’ favourite for a couple of exceptional years, the fintech industry has returned to more familiar territory. The sudden plunge in public tech valuations since November 2021 has brought forth a wave of massive down rounds and significant staff reductions. Klarna illustrates perfectly this paradigm shift. In July 2022, the company raised €730m at a valuation of €6.1bn, marking an astonishing 85% drop from its €40bn valuation just one year prior.

   The trend observed in 2022 continued into Q1-23, with a meagre €1.7bn in total venture capital investments— the lowest since Q4-18— and a mere €300m in total exit value, matching the dismal figures seen during the Covid-19 quarter of Q2-20. Forecasts indicate that Q2 and Q3 of 2023 are likely to mirror this subdued performance.

   However, there is a glimmer of hope on the horizon. Public tech stocks have exhibited signs of recovery since January 2023, with the BVP Nasdaq Emerging Cloud Index, a gauge of public tech valuations in the US, rising by an impressive 28% during this period. This resurgence in public markets may also reignite activity in Europe’s private market, including venture capital investments and mergers and acquisitions, potentially gaining momentum from Q4-23 onwards.

   Looking ahead to 2024, a pivotal moment looms for the European tech landscape. Many fintech scale-ups and unicorns are anticipated to reap the rewards of their labour by achieving profitability. This milestone holds the key to facilitating successful exits, particularly through initial public offerings (IPOs). As such, 2024 could usher in a transformative phase for the European tech scene.

Arthur Porré, Founding Partner, June 20th, 2023