In mythology, unicorns are fortunate, but in reality they are not necessarily, especially for Fintech companies.
According to the latest valuation trends and views of VCs in related fields, efforts to reach a valuation of US$1 billion and above may no longer be the best choice for startups. Rising valuations will put Fintech in an awkward position so as to scare off investors because it is difficult to find buyers because of overvalued valuations. Without a clear business model, it makes it difficult for them to go public.
From the latest financing data, this situation has a very high probability. According to research firm CB Insights, Fintech’s second-quarter financing decreased by 49% from the previous quarter. The market value of Lending Club, the star P2P lending company, has fallen from $5.4 billion in 2015 to the latest $2.1 billion in 2015. It also gives investors skepticism about Fintech. This cold attitude is in stark contrast to last year’s enthusiasm, when investors were looking for companies that could subvert banks and traditional financial institutions.
In contrast, according to reports from IT Orange, the number of investment and financing of Internet finance companies in the first half of this year was 174, which was significantly lower than the 208 cases in the first half of last year. Unexpectedly, the amount of financing reached 61 billion yuan, an increase of more than 300% from 18.1 billion yuan in the same period of last year. There are only super giants such as Ant Financial, Lu Jinsui and Jingdong Finance in the financing. The financing of Ant Financial Services has reached US$4.5 billion. If you exclude the influence of extreme examples, the situation is not too optimistic.
Data from CB Insights also showed that the largest acquisition in Fintech's field was 2013 US plantation company Monsanto swallowed the agricultural insurance company The Climate for $1.1 billion, followed by Singapore Telecom’s $810 million acquisition of payment security company Trustwave in 2015. And in 2013, EBay acquired the payment platform Braintree for $800 million. Another example of the lack of unicorn level is that Northwestern Mutual acquired LearnVest, an online money management platform, for $250 million in 2015.
The largest merger in Fintech field
However, many companies have far exceeded the valuation of 1 billion. The online loan platform Social Finance and the domestic Lujin Institute are worth 4 billion and 18 billion US dollars, respectively, and Jingdong Finance also reached US$7.1 billion. Other Citigroup companies include Betterit and Wealthfront, both of which are valued at US$700 million; and WorldRemit, an online payment company, has also reached US$500 million.
With each valuation increase, the company’s potential buyers will be reduced, and large companies will be more skeptical about the return of the acquisition. 2015 was the year in which Fintech’s acquisitions took place. In the first half of the year, there were 22 acquisitions; however, this year it dropped to 16 and there were 6 mergers and acquisitions in China.
Years Fintech acquisitions
To say who will acquire companies with high valuations, one may be a non-financial company that wants to enter. However, although companies such as Apple and Amazon are financially rich, they are likely not to do so because financial services are more strictly regulated. Google and Apple’s public acquisition list can also be found. They have not acquired companies in the financial sector, although both have their own payment services Android Pay and Apple Pay.
The domestic high valuation of Fintech seems not to take into account the acquisition because they are born out of large companies such as Ant Financial Services and JD Financial. This should be considered a big difference between domestic and foreign financial technology companies.
High valuation companies also have an option to lower their valuation for sale. This situation is also very common. The most recent domestic case is pea pods.
LC/OD/Square Chart
Listing is not as attractive as it used to be. Among the most well-known IPOs in the Fintech field, only one stock is still higher than the initial offering price. Both Lending Club and On Deck have fallen a lot compared to the initial listing. Although Square is relatively strong, the stock is highly volatile.
Pleasant loan charts
The pleasant loans of domestic companies listed in the United States have performed very well this year. However, the new P2P regulations introduced at the end of August and the prosecution of the United States have also experienced quite a bit of trouble.
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