Fintech startups are As the data show, is experiencing a recession more than most other sectors. So much so that even the largest and most well-known private fintech companies suffer from unfortunate overpricing.
Data compiled by Andreessen Horowitz, a well-known venture capital firm with a background in fintech investments. most recently, crypto — shows that public fintech companies are suffering from more significant cost reductions than other technology categories. At the same time, new information from various Fidelity funds indicates that the investor giant has changed its mind about the value of some of the most successful startups, including Stripe.
The exchange explores startups, markets and money.
There is a tattered chestnut tree in Silicon Valley that, no matter what the market conditions, the best startups can always grow. The argument implies that in weaker market conditions, as we saw in parts of 2020 and 2021, startups with less core strength will be able to raise capital, only to run into trouble later when the market turns around. On the contrary, the best startups, regardless of the macroeconomic situation, will continue to work.
In one sense this statement is a tautology; from well the best companies will have the highest chance of success—they are the best companies, after all. On the other hand, this is a narrow comment. Yes, the best startups can always rise. But at what cost?
What remains unsaid is that even the private market upstarts who received the most applause, ratings, capital and earnings during the boom may be subject to revaluation when the market changes. This is what’s happening with Stripe, although we shouldn’t be too shocked given the cyclone of data points supporting the latest version of Fidelity. Let’s explore.
How much does a stripe cost?
Let’s start with a general look at the value of technology companies. The Bessemer Cloud Index has lost more than half its value since the highs of late 2021, including a basket of modern software companies. the fall from a peak of $65.51 to just over $30 today. If we slice the market more thinly, we will see even more valuation compression in fintech.
Enter Future, a16z’s own edition, created during a bout of anti-media sentiment among the tech class. Per this article on the blog of the investment groupvaluations of public fintech companies peaked at about 25 times forward revenue in October 2021. Since then, shares in the same group of fintech companies have fallen by about 4x their forward earnings (we’re reading from a chart, so the data here is more directional than accurate).
Other categories of public tech companies saw sharp declines, for example, corporate company peak forward multiples fell from 16x or 17x to around 7x. But since the bursting of the 2021 bubble, no category has received more support than fintech. (This is one of the reasons we don’t see fintech IPOs this year, among other factors.)
From that perspective, it’s no surprise that Fidelity is overvaluing its stake in Stripe.
To understand how Fidelity has valued and revalued its stake in Stripe over time, we take the reports from Business Insider and Bloomberg, as well as filings with the U.S. Securities and Exchange Commission:
Credit: techcrunch.com /