FinTech Winter Chills Funding as Busted IPOs Litter Landscape

Once hot FinTechs are now facing continued pressure, particularly on the funding front.

The business models, by and large, have been propelled less by profits than by customer acquisition. And the question remains as to whether the cash on hand is enough to get through the winter itself.

Overall, the picture is a muted one. As reported by CB Insights earlier this month in its “State of Venture” report, FinTech funding is off by 38% quarter over quarter, which translates to $12.9 billion, and a multi-quarter low.

The slump is mirrored by PYMNTS’ own data, where the FinTech IPO Index, year to date, is off more than 45%. With a bit more granular detail, only two of our 40+ names trades higher than their IPO price, and that would be Bill.com, which is up more than 250%, and Futu Holdings, which has surged by 122%. The remainder trade as busted IPOs, which indicate just how sour the markets have become.

There’s a duality here. The fact that so many busted IPOs are out there puts at least some doubt that funding the next wave of FinTechs sets up a smooth path to that traditional exit strategy known as the IPO, which allows early-stage investors to cash out their holdings as would-be retail and institutional holders clamor to build positions in their own brokerage accounts.

There are at least some pockets of enthusiasm. As noted in this space in recent weeks, JPMorgan Chase has a new platform aimed at connecting founders with venture capital through the Capital Connect offering.

However, the overall trend is one of caution. If there is one segment that might be chilled more than others, over the near term, it might be found in online ad spend, across the platforms that have advertising built in as a revenue stream, or within those that are reliant on ads to help bring buyers and sellers together.

Snap sounds the alarm here, having plummeted last week in the wake of earnings that showed growth slowing to pretty much nil (per guidance), after a quarter that showed 6% growth, a marked slowdown. Macro concerns dominate, Google and Meta will weigh in this week on their own take on the advertising slowdown, which in turn points to how end companies view their business prospects. Some of the firms in the FinTech IPO group, such as Opendoor, make money through a multi-channel strategy that is in part reliant on ads (to get properties in front of would be buyers).