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A Storm’s Brewing for Fintech Startups
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By Yuliya Chernova, WSJ Pro
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Good day. The steep drop in the value of fintech stocks has yet to play out fully in the private markets, warns David Jegen, managing partner of F-Prime Capital’s tech fund.
“Last year is going to prove the calm before the storm for private markets,” he said. Companies that survived by cutting costs and raising bridge rounds in 2022 will need capital again. If they don’t have good business metrics by then, they’ll struggle to get investor interest, Mr. Jegen said. The slump would start with more mature companies and work its way through to early-stage rounds, he said.
“We’ll see an awful lot of failure,” he added.
F-Prime Capital, which is affiliated with FMR LLC, parent of Fidelity Investments, tracks a basket of 55 publicly-traded fintech stocks for its Fintech Index. That index sank by 78% last year. By Dec. 31, the combined market cap of the companies in the index had plummeted to $397 billion from a $1.3 trillion peak in late 2021.
The largest venture exits of the 2020-2021 IPO boom were also some of the worst performers last year, Mr. Jegen noted, among them, Affirm Holdings Inc., Coinbase Global Inc. and Robinhood Markets Inc.
“That’s merely a function of how exuberant the markets were in 2021,” he said. “If you were a company that IPO’ed at the height of the market, it meant you had further to fall.”
Many fintechs are trading at revenue multiples worse than those of the incumbents they are trying to replace. For fintechs, especially in categories like lending, real estate and insurance, the market changed drastically. Higher costs of capital and higher-risk borrower pools, for example, caught up with lenders, Mr. Jegen said. Insurtech companies, meanwhile, saw higher loss ratios than incumbents. At the same time, investors put much less value on growth.
Despite his dismal outlook, Mr. Jegen said fintech has a lot of potential. Some business models are proving more resilient than others, for instance, vertical software companies that offer financial services to their niche clients, and banking-as-a-service providers that allow clients in other industries to easily launch financial services, he said.
“Despite the reassessment and the correction, we remain genuinely excited about the long-term prospects of fintech disrupting financial services,” Mr. Jegen said.
And now on to the news...
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Vice Media has struggled for years to show rapid growth and live up to an early valuation of $5.7 billion. PHOTO: MARIO TAMA/GETTY IMAGES
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Vice Media gets lifeline as bills pile up. Vice Media has secured more than $30 million in debt financing from Fortress Investment Group, according to a person familiar with the matter, as the new-media company faces a financial crunch, The Wall Street Journal reports.
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Vice, which is trying to sell itself, owes millions of dollars to vendors and advisers, some of whom haven’t been paid for more than six months, according to people familiar with the matter. Some vendors have resorted to collections agencies to retrieve payments, some of the people said.
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Fortress’s loan comes as the once-hot Brooklyn upstart—whose assets include Vice News, Motherboard, Refinery29 and Vice TV—has struggled for years to show rapid growth and live up to an early valuation of $5.7 billion.
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6.4%
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Inflation advanced this much in January, according to the Labor Department, marking the seventh straight month of easing inflation since peaking at 9.1% in June, the highest reading since 1981.
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Airbnb Posts First Annual Profit as Travel Demand Remains Strong
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Airbnb Inc. recorded its first-ever annual profit last year, boosted by a rise in cross-border travel during the fourth quarter over previous years, WSJ reports. The short-term rental company recorded a profit of $1.9 billion in 2022, after losing $352 million in 2021. Fourth-quarter profit of $319 million came in well ahead of the consensus analyst estimate of $171 million. Airbnb said it benefited from strong travel demand, despite high inflation and recession fears. Americans took advantage of a strong dollar to fly abroad and European intracontinental travel picked up.
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Former FTX Executive’s Charity Profited From Employee Token Prices
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A former FTX executive’s foundation made millions of dollars off the company’s digital tokens while he was its chief of staff and is now trying to eke out a bit more from a frozen account on the exchange, WSJ Pro reports.
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While working at FTX and its closely tied trading firm Alameda Research, Ruairi Donnelly helped run a charitable foundation that promoted research in effective altruism and artificial intelligence, topics of shared interest to him and FTX founder Sam Bankman-Fried, according to people familiar with the matter.
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One of the first employees at Alameda, Mr. Donnelly became the chief of staff of FTX as the exchange launched in 2019 and introduced its own currency called FTT, a digital coin for use on the new platform. At the time, FTX offered early employees like Mr. Donnelly a deal to buy its FTT tokens for 5 cents each, weeks before trading opened to the public at an initial price of $1, people familiar with the matter said.
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People
Proptech-focused Fifth Wall appointed Fethi Kirdar as a managing director on the capital formation team, where he will head coverage of the Middle East and North Africa. He previously led finance and investments at International Media Investments.
FTV Capital promoted Allison Walker, Mike Vostrizansky and Andy Fleischman to partner. Ms. Walker is also chief talent officer at FTV Capital, and before joining the firm she was at TCV. Mr. Vostrizansky was a principal at Flexpoint Ford and Pine Brook Road Partners. Mr. Fleischman was a partner at Kirkland & Ellis.
Cybersecurity platform MixMode Inc. added Mark Rotolo as chief revenue officer. He was previously at Fortinet. The Santa Barbara, Calif.-based company is backed by PSG and Entrada Ventures.
Exits
Employee management software provider GoCo.io acquired WFHomie, an employee experience and people analytics platform for remote-first companies, for an undisclosed amount. Last year, GoCo.io raised a $15 million funding round led by ATX Venture Partners. WFHomie is listed in the portfolios of Dispatch Ventures, LOI Venture, Newfund Management and Forum Ventures.
Flyhomes Inc., a provider of financial tools to homebuyers, acquired Loftium Inc., which enables prospective homeowners to buy their home within three years via short-term rental income. Terms weren’t disclosed. Seattle-based Flyhomes is backed by investors including Norwest Venture Partners, Battery Ventures, Fifth Wall, Andreessen Horowitz and Canvas Ventures. Loftium’s website lists Threshold, Founders’ Co-op and NextView Ventures as investors.
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Aspire, a Singapore-based finance operating system for businesses, closed a $100 million Series C round. Co-led by Lightspeed Venture Partners and Sequoia Capital Southeast Asia, the investment included participation from Paypal Ventures, LGT Capital Partners, Picus Capital and MassMutual Ventures.
Taurus SA, a Swiss digital asset infrastructure provider for financial institutions in Europe, landed $65 million in Series B funding led by Credit Suisse. New investors Deutsche Bank, Pictet Group and Cedar Mundi Ventures also joined the round, alongside previous backers Arab Bank Switzerland and Investis Group.
Descope, a Los Altos, Calif.-based authentication and user management platform, emerged from stealth with $53 million in seed funding. Lead investors Lightspeed Venture Partners and GGV Capital were joined by Unusual Ventures, Dell Technologies Capital, Cerca Partners, TechAviv, J Ventures, Silicon Valley CISO Investments and others in the round.
Oligo Security, a Tel Aviv-based runtime application security and observability platform, exited stealth with $28 million in seed and Series A funding from investors including Lightspeed Venture Partners, Ballistic Ventures and TLV Partners.
Monad Labs, a Chicago-based blockchain startup, completed a $19 million seed round. Led by Dragonfly Capital, the funding included additional support from Placeholder, Lemniscap, Shima Capital, Finality Capital and others.
OpenEyes, a commercial auto insurance provider with offices in New York and Austin, Texas, raised $18 million in Series A financing. Insight Partners and Pitango led the investment, which included contributions from MoreVC.
NewsWhip, a New York- and Dublin-based predictive media monitoring platform, picked up a $13 million investment from AshGrove Capital.
Prevu3D Inc., a Montreal-based 3D digital twin technology provider, closed a $10 million Series A round. Cycle Capital led the investment, which saw participation from Brightspark Ventures and Desjardins Capital.
Smartrr, a New York-based subscription app for Shopify brands, fetched $10 million in Series A funding. Lead investor Canvas Ventures was joined by Expa and Nyca Partners in the round.
SwarmFarm Robotics, an Australian provider of intelligent robotics for use in agriculture, snagged 12 million Australian dollars (about $8.3 million) in Series A funding. Conexus Venture Capital’s Emmertech fund led the round, which included contributions from Tribe Global Ventures, Access Capital, Tenacious Ventures and GrainInnovate.
Rivet Work Inc., a Detroit-based construction labor management platform, was seeded with a $5.6 million investment. Led by defy, the round included support from Augment Ventures, Detroit Venture Partners, Ideal Industries and Michigan Rise. Neil Sequeira, founder and partner at defy, will join the company’s board.
Ottometric, a software startup focused on automating and streamlining the validation and training processes for advanced driver assistance systems, collected $4.9 million in seed funding. Rally Ventures led the round, which included participation from Goodyear Ventures, Proeza Ventures, Automotive Ventures, Trucks Venture Capital, Reinforced Ventures and Investor Collaborative.
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A range of retailers in Moscow still stock Cisco hardware, supplied by a network of third-party vendors. PHOTO: NATALIA KOLESNIKOVA/AGENCE FRANCE-PRESSE/GETTY IMAGES
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