Revolut’s valuation woes signal a stormy horizon for less profitable neobanks
The exchange is looking to understand what a key group of fintech startups might be worth – or not
While the bank world sees US lender First Republic publicly convulse after its earnings report detailed a widespread evaporation of its deposit base, the start-up world of neobanks is also taking a hit.
Earlier this week, Revolut, a highly valued UK-based neobank, saw its value drop by around 46% in the eyes of one of its backers.
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Given that Revolut last raised $800 million for a $33 billion valuation in mid-2021, it stands to reason that it was probably overvalued at the time – show us a nine-figure seed round from back then that sits well against today’s valuation marks and we going to buy you a smoothie.
But Revolut taking such a steep price cut almost two years after it was last priced made us sit up and take notice.
There was a time then neobank-for-x-market were among the most popular startup models, after all. Mountains of capital were invested in dozens of global startups looking to reinvent or at least revamp consumer and SMB banking. It even led to some liquidity, including the massive Nubank IPO and resulting 11-figure valuation.
Revolut’s revaluation raises some questions: How much trimming is left to do in the fintech world? And is it likely that we will see something similar more generally in the neo-banking start-up sector?
This morning we analyze what happened in venture in Q1 2023, as well as a handful of data points from F-Prime’s fintech index and resulting reports. Next, we’ll cover the latest neobank financial results we have and come to a conclusion about how much pain – or how little – neobanks can expect in the months ahead. To work!
Money in, money out
We have fintech funding data from CB Insights for Q1 2023, but it comes with a big asterisk. Without further context, funding for fintech startups increased by 55% from the fourth quarter of 2022, bringing the global total to $15 billion.
The caveat, however, is that Stripe’s latest $6.5 billion raise alone accounted for more than a third of that sum. If you exclude that round, the numbers come down to $8.5 billion, representing a 12% quarter-over-quarter decline.
That’s the big picture. Looking more closely at the fintech cohort, we are curious as to which categories outperformed others. That kind of data on private companies is hard to come by, but we do have some interesting insights on public companies.
