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‘The mood is very grim’: Once-hot fintech sector faces IPO delays and consolidation

Investment in fintech is slowing as worries around rising inflation and the prospect of higher interest rates have dented economic sentiment.

Elena Noviello | Moment | Getty Images

AMSTERDAM — Financial technology companies are putting IPO plans on hold and cutting expenses as fears of an impending recession cause a shift in how investors view the market.

At the Money 20/20 conference in Amsterdam, bosses of major fintech players sounded the alarm about the impact of a deteriorating macroeconomic climate on fundraising and valuations.

John Collison, co-founder and president of Stripe, said he was unsure if the company could justify its $95 billion valuation given the current economic environment.

“The honest answer is, I don’t know,” Collison said on stage Tuesday. Stripe raised venture capital funding last year and is not currently looking to raise again, he added.

It comes as buy now, pay later firm Klarna is reportedly looking to raise fresh funds at a 30% discount to its $46 billion valuation, while rival group Affirm has lost roughly two thirds of its stock market value since the start of 2022.

IPO delays

Funding squeeze

Investment in the fintech sector boomed last year, reaching a record $132 billion globally — thanks in large part to the effects of Covid lockdowns on people’s shopping habits. But — as worries around rising inflation and higher interest rates hit home — funding dropped 18% in the first quarter from the previous three months to $28.8 billion, according to data from CB Insights.

“There’s going to be more of a focus on unit economics versus just crazy growth,” Ricard Schaefer, partner at Target Global and an early investor in financial services app Revolut, told CNBC.

Stripe’s Collison had a simple piece of advice for fintech founders at the conference: tear up the 2021 investor pitch.

“They definitely can’t do the 2021 pitch,” he said. “It needs to be a new pitch, a 2022 pitch.”

Ken Serdons, chief commercial officer of Dutch payments firm Mollie, agreed. Fintechs seeking fresh funds now will need to present a “clear path to profitability,” he said.

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