Weekly update #36
Welcome to this edition of the weekly newsletter. The idea behind this activity is to gather all the information in the startup ecosystem in one place, with a special focus on the fintech market.
Before jumping to the main topics for this week, I am exploring partnerships with the newsletter. So this edition is sponsored by Notion, which is offering a 6-months free plan of its plus product to all founders submitting an application for their startups program.
In order to redeem the free trial, submit an application using this link https://ntn.so/michelemattei, select Michele Mattei as partner and include the following partner key: STARTUP4110P62416. I really hope it will be helpful for many founders out there!
Coming back to us, I’ve been reading a very interesting report this week: “Global Fintech 2024 - Prudence, Profits and Growth”, 2nd edition, coauthored by Boston Consulting Group (BCG) and QED Investors .
Coming off the highs of 2021, fintech revenue multiples have fallen and funding is down, everyone involved in this ecosystem knows that pretty well. But I believe BCG nailed the description of the market when they give the subtitle prudence, profits and growth. The market is valued at $320 billion today, but is expected to grow to $1.5 trillion in 2030. On top of that, we saw an increase of 14% in revenues over the past two years, with an estimate of approximately 25pp still to be recovered in terms of EBITDA improvements for fintech startups. Here my main takeaways from the report:
As we said, the past three years have been challenging for fintech companies. Since the peak of 2021, revenue multiples have plummeted from 20 times to an average of 4 times, and funding has decreased by 70%—with almost a 50% drop in the past year alone. The impact has been more severe in certain sectors. For instance, late-stage investments (series C to E+) have fallen by 81% to 89%, whereas early-stage funding rounds have declined by 54% to 73%.
Overall, funding has decreased by at least half across all fintech segments, except for insurance and payments. Despite these setbacks, we believe these challenges represent a short-term correction—a cooling of investor enthusiasm—that we discussed in last year’s report and that these difficulties are beginning to subside.
At the same time, global fintech revenues have sustained strong growth, averaging 14% over the past two years, and rising to 21% when excluding fintechs exposed to crypto and China. The growth rate during 2022 and 2023 is notable, especially when compared to the 29% rate from 2019 to 2023. As expected, growth rates vary across different sectors and regions, but the most significant disparity is seen between the emerging leaders—the top-quartile performers—and the bottom-quartile fintechs.
Notably, the industry has begun transitioning from a "growth at all costs" approach to focusing on profitable growth, with EBITDA margins increasing by an average of 9 percentage points. However, this shift is still in its early phases, as the majority of the top 70 public fintechs continue to operate below the "rule of 40" threshold—a financial metric combining revenue growth and profit margin percentages.
Digital challenger banks excelled in 2023. For instance, Nubank surpassed 100 million users by May 2024 and aims to become the largest and most profitable bank in Latin America, with about one in two adult Brazilians as customers. In Europe, Monzo achieved operational profitability in the first half of 2023 and secured additional funding to support its ambitious global expansion plans. Over half of the profitable challenger banks are based in Asia, such as South Korea’s KakaoBank, which often operates within an integrated ecosystem.
There is no single formula for a successful challenger bank. Leading banks have followed diverse paths to achieve scale and profitability, but they all share a commitment to establishing a lasting presence in the industry.
The applications and impact of GenAI will continue to grow in this industry. We can foresee increased efficiencies for banks and fintechs in various areas: cost of goods sold (COGS), with improved productivity in development and service operations; sales and marketing, with faster content creation and enhanced salesforce effectiveness; and general administrative expenses, with optimized third-party spending, simplified tech stacks, and automated support functions.
For fintechs, in particular, the impact will be more pronounced in the near term due to their "digital first" cost structures, which are heavily focused on areas where GenAI delivers substantial gains, such as coding, customer support, and digital marketing. You can read the full report here.
As a final thought, I think it is easy to forget sometimes, but we all should remember the state of the financial industry in terms of usability and access just 5, 10 or 20 years ago. While a lot of fintech startups obviously didn’t survive, I think that all of them contributed to create the ecosystem and financial landscape we have right now, where only in India more than 400 million people recently were able to access a bank account. I think we can only be positive about this market in the long run.
Recommended by LinkedIn
Before jumping to the latest news, a quick request from my side. I will start a small series of podcasts to interview fintech founders and VC managers active in the ecosystem. If you want to be part of it, feel free to drop me a line on Linkedin!
Anyway we saw some very interesting news in the market this week. Revolut released financial report for 2023, finally hitting profitability. Coinbase and Stripe striked a partnership to expand global crypto adoption, while again in the crypto industry Conio and Mesh closed a partnership for a first open banking platform for Bitcoin. And a lot of acquisitions! Vivid Money acquired the treasury solution from Pile (part of Vivid Money) , while Taxfix acquired the UK based TaxScouts , and finally BlackRock acquired Preqin . Also in the VC industry there was a lot of movements, with Industry Ventures raising a $900 million fund, DTCP raising $450 million, followed by Seaya Andromeda with $300 million and Forestay Capital with $220 million. In the italian ecosystem we saw Rent2Cash raising a $3 million pre-seed and Starting Finance raising $2 million, while Nexi Group strikes a partnership with Amazon on payments. And finally, some very interesting funding rounds from fintech startups like Dealflow - Invoicing , Hometap , Trever , TRIVER , Colors , Stori , SendBlocks , Apiday , Netevia and many others.
But let's take a closer look at the main news of the last seven days:
Closed deals
Insights on the VC industry
News on the market
A special look in the Italian market
And here some useful resources for everyone involved in the ecosystem:
Events you don’t want to miss
You have a cool event you want to mention or to sponsor? Feel free to send me a DM.
Startups raising funds
You want to be present in this list? Feel free to shoot me a DM on Linkedin.
Take also a look at the last edition of the newsletter, Weekly update #35
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