2021 emerged as a groundbreaking year for FinTechs. Much more money poured in. Several fintechs exited by getting acquired by incumbents or by scale-up fintechs. But arguably the most important trend of 2021 was a blizzard of fintechs choosing to list on public markets. Fintechs’ product and geographic expansion plans coupled with venture capitalists’ search for returns incentivized the choice of public listings.
And while some did achieve this milestone with great response in public markets, others struggled to maintain their listing valuations and witnessed moderate to massive corrections in their share prices, a subject that we implored in-depth previously through the 2021 FinTech Public Listing Trends.
FinTechs’ Battle For Sustainable Profits
Out of the 21 FinTechs that went live on public markets in 2021, only 6 made the cut in having their books in green. UK-based money transfer fintech Wise, which listed on the London Stock Exchange in the month of July with a valuation of $11bn, witnessed a rise of 9% in shares during the early trade itself. It is one of the rare fintechs, which has been profitable for over 4 years before listing.
Crypto-lending and exchange platform Coinbase also makes its mark as a young growth company that has been profitable since 2020. The company’s NASDAQ launch opened with a bang as it raked in a whopping $80bn after its first day of public trading. However, this windfall was soon met with a blow, as the company remained down 30% in October since its public debut. Although the volatility of cryptocurrencies is a challenging aspect for the firm, it still remains one of the leading disruptive technologies in the space – making it likely for $COIN to scale back once the market is on more stable grounds.
Not all debutants observed such a triumph – with a majority of the contenders facing massive devaluation on public markets post IPO. Even though Oscar Health has presented an innovative and sleek model for health insurance, the US company has witnessed a steep decline of nearly 50% from its $1.2bn IPO price raised in early March last year. Amongst others who chose to go public without having achieved profitability, the names of trading and investing app Robinhood, Brazilian digital bank Nubank, e-commerce payment giant PayTm, and 2012-founded restaurant management platform Toast, come out on the top.
Move Fast And Grab The Unicorn Status
The exit course of most of these candidates was soon met by the disclosure of their private market valuations. While the average time to achieve unicorn status among the 2021 publicly listed fintech firms was approximately 7 years, some players enjoyed the thrill of getting there quicker.
Distribution-first fintech firms were the quickest to grab the unicorn tag. Founded in 2012, Oscar Health crossed the $1bn valuation mark within 2 years of its launch. American financial services company SoFi achieved this status within a remarkable span of 3 years. Others who became unicorns before the 5-year mark, with respect to their founding dates, include insurtech firm Hippo Insurance (4 years), leading cross-border payment platform dLocal (4 years), and Singapore-based online transportation service Grab (2 years).
A noticeable trend in this movement can be observed in that the majority of these companies run on a business-to-consumer (B2C) model, thereby acquiring their unicorn status as a function of growth in terms of the number of customers and revenues. Revenue-first fintech firms such as accounts payable solution AvidXchange (founded 2000) became a unicorn 17 years after its launch. Cross-border payment solution Payoneer also made a steady move towards achieving its unicorn status in December 2017 – 12 years from its launch in 2005. These business-to-business (B2B) firms saw tremendous growth much later in their lifespans, which can be attributed to the introduction of novel technologies that made a significant impact in lowering operational costs.
And Now… Time for the Initial Public Appearance
The past year was pivotal for fintechs debuting on the public markets. Looking at the timeline for this incredible wave, some of these digital aspirants made their public appearances within a span of fewer than 10 years. South Korean mobile-only Kakao Bank and Uruguay-based dLocal each took 5 years from their respective times of establishment in 2016 to join the listing bandwagon. US’ cloud-based mortgage-tech innovator Blend took close to 9 years for public listing. Buy now pay later (BNPL) fintech Affirm, which went public through a traditional IPO route, also began trading on NASDAQ 9 years after its inception in early 2012.
2021, proved to be a litmus test for fintechs in the public markets. For some – the ride was bumpy; for others – they got bamboozled. In 2022, a variety of fintechs, across sectors and geographies, are vying to join the public-listed tag. However, the fluctuation in fortunes on public markets has also brought a renewed focus on articulating and traversing the path to profitability to gain the trust of investors in public markets. 2022 is also expected to be the year that will set the tone for FinTech as a mature sector that can withstand and even thrive amidst the scrutiny of regulators, vigorous competition from incumbents, and speculative sentiments of public markets. And as they say – only time will tell.
(Disclaimer: This is not an investment advice. The article may contain secondary links on clients and partners. However these partnerships do not influence editorial content.)