Welcome to The Switch! If you got this in your inbox, thank you for signing up and trusting us. If you read this as a post on our site, please sign up here so that you can receive it immediately in the future. Every week I watch the hottest fintech news from the past week. This includes everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay up to date – and understand it – so you stay informed. † Mary Ann
Fired in H1 2022
In 2021, fintech startups were the largest recipients of venture capital worldwide, accounting for about 21% of the dollars raised with $131.5 billion in 4,969 deals. So far, in 2022, fintech startups will earn another less favorable distinction – accounting for the third-largest number of layoffs, in percentage terms, globally.
As of July 1, some 3,709 employees — exclusive crypto firms – were laid off in 41 “layoff events” in the second quarter of 2022, according to an analysis by Roger Lee of fired.fyi† For context, that’s 3,709 of the 36,861 startup employees laid off in total in the second quarter, meaning fintech made up 10.1% of the total. Based on that layout, the fintech space was ranked third behind food and transportation, respectively. However, the site classified companies like Better.com in the “Real Estate” category. So if you include that company’s layoffs – which were about 3,000 in Q1 2022 – the fintech numbers rise even higher and fintech becomes the category with the most layoffs in percentage – 15.4% – in the first half of 2022.
Especially in all of 2020, 8,715 employees in fintech were laid off. And there are certainly a lot more fintechs today than there were then. In 2020, fintech lagged the transportation and travel categories when it came to layoffs as a percentage of the total, Lee told londonbusinessblog.com via email.
Remarkably, NO employees in fintech have been laid off throughout 2021according to Lee’s analysis.
In summary, in the first half of 2022, 4,189 fintech employees were laid off at 45 events; this number is of the 46,740 start-up workers who were laid off in total, accounting for 11.2% of the total. That compares to 8,375 in the first half of 2020 at the start of the COVID-19 pandemic.
Klarna’s layoff of 700 employees, or 10% of its workforce, and Robinhood’s layoff of 300 employees were among the largest layoffs in the second quarter.
Keep in mind that it’s important to keep in mind that there were certainly other layoffs that weren’t recorded here, so the actual numbers are likely even higher.
Layoffs are incredibly difficult for the affected employees, those left behind and for the companies themselves. But as we’ve seen over time, some companies can handle them better than others. I thought this post by Latitud co-founder Brian Requarth summed it up well: “Firings are tough and I don’t want to reduce that, but most likely the talent will be redistributed quickly. If you lost your job, hang on. If you have to let people go, the most important thing is to treat those people right. Not just because it’s the right thing to do, but because you’re sending a message to the people staying with you.”
Both Bolt and Better (how’s that for alliteration) have been the subject of (a lot of) negative headlines in recent months. To say their reputation has been dented is an understatement. Coincidentally, both companies shared some news this week in apparent efforts to improve their tarnished reputations. In what many considered to be a mind-boggling turn of events, Bolt took one click to deal with retail giant ABG Group and turn it into a shareholder. After the latter made so many derogatory comments about the former, you might be wondering why it would want to have a stake in the company. It doesn’t really make any sense, though Insider speculated this year that that was ABG’s goal with the lawsuit to begin with. Still, I had a great chat with Bolt’s CEO and former Amazon exec Maju Kuruvilla, and the biggest takeaways were (1) the company is on a mission to grow more responsibly as it cut some jobs in the second quarter and ” really doubles down on things that are a core value proposition”; (2) Bolt says it now has 3 years worth of runway, which, if true, is impressive; and (3) although revenues seemed to be much lower than expected for an $11 billion company, Bolt is not giving up and the settlement of this case can certainly be considered a victory, even if it is a bit confusing.
In the case of Better.com, the embattled digital mortgage lender revealed a series of new hires for senior executives that were frankly mind-boggling. Among them are former execs of the likes of Zillow, Casper and LendingTree. I haven’t spoken to Better CEO Vishal Garg, but he did provide a canned statement expressing his excitement at all the new people coming on board after a flurry of senior executives leaving and amid a tumultuous environment. It’s fascinating that so many people are willing to bet on Better after everything that’s happened since December 1. Is the business really turning around? We will see.
I did that a few years ago a deep dive in Atlanta’s startup scene and was shocked to see how robust it was. Last week, Veronica Irwin of Protocol examined the southern city with a fintech lens, writing: “San Francisco has Square, Stripe and Plaid. But Atlanta has CoreCard, Kabbage, and CheckFree. It also lays claim to groundbreaking payment cards, electronic payments and ATMs† Many of the day-to-day innovations in fintech that we have come to rely on are due to the metropolitan Atlanta area.”
Preliminary figures confirm what we all already know: investing in the world of fintech has slowed down. Steve McLaughlin, managing partner at Financial Technology Partners (aka FT Partners) posted on LinkedIn that “financing activity slowed significantly compared to Q1 and last year, but activity remained quite robust compared to any other period besides 2021; activity appeared to be declining as the quarter progressed.” For example, in the second quarter, the total dollar volume raised by private fintech companies was $27.5 billion, a 27% decrease compared to the first quarter and a 31% decrease compared to the same period last year. Still, Q2 was better every quarter before 2021.
Today it is rare that a week goes by without any layoffs in the industry. Last week, Brazilian proptech startup Loft announced it has let go of 380 employees, or 12% of its workforce. Earlier this year, it had laid off 159 people. In an emailed statement, Loft described the move as “a reorganization of its operation.” It is clear that LatAm is not immune to the downturn in the housing market, partly due to rising interest rates.
Two big names in fintech entered into a partnership last week. based in London revolution said it is working with Stripe (which started in Ireland) to support payments in the UK and Europe and “accelerate expansion into new markets”. In particular, Revolut will facilitate payments through Stripe’s existing infrastructure.
Financing and M&A
Offer of the week
Fintech from El Salvador n1co (read: nee-koh) has raised $12 million at a post-money valuation of $64.8 million, in what it describes as a historic pre-seed round for the region. The fintech company was founded by the same founders as Hugo – a super app that recently sold to Delivery Hero for $150 million — Alejandro Argumedo, Ricardo Cuellar and Juan Maceda.
Alejandro McCormack tells londonbusinessblog.com that he was invited to join the trio as co-founder and serves as COO/Interim CEO because of his previous experience at N26 and Raisin. He said the original founding trio was “again betting on a region usually forgotten in the tech landscape.” Focusing on the payment space, n1co says it has already signed up more than 1,000 merchants who now accept credit and debit card payments using n1co’s technology, specifically QR codes, payment links and online storefront processing. With a monthly transaction volume of nearly $1 million in five countries (El Salvador, Guatemala, Honduras, Nicaragua and Dominican Republic), McCormack shared via email that n1co will use the new capital to accelerate growth (currently 30% MoM) , POS devices are developing and push are soon to be launched current account and Visa debit card.
With the rollout of the n1co card, the company believes it will position it as the first neobank targeting Central America and the Dominican Republic – a region of approximately 55 million people. “This represents a larger addressable market than Colombia, with lower banking penetration and an average of about 1.5 smartphones per adult,” McCormack added.
Interestingly, the startup decided to forego the typical VC route during the raise, instead focusing on regional groups that it believes will add value to its business model, including the region’s largest gas station operators, a of the largest supermarket chains and other large regional retail chains. “In total, they have about $1.4 billion in card transaction volume per year — volume that they’ve committed to process with n1co,” McCormack said.
Seen on londonbusinessblog.com
Peakflo’s Bid To Build South East Asia Business Payments Attracts Capital, Attracts Customers
UK-based YuLife raises $120 million at an $800 million valuation as it expands its gamified, wellness-focused approach to life insurance
a16z leads a $6.5 million starting round for Adaptive, a construction software and fintech game. In particular, founders and execs of Airbase, Brex and Ramp have also poured money into the round.
DEUNA Enters Latin America’s Busy Checkout Industry With One Click Right At $37 Million
Finalis, ‘a platform for dealmakers’, raises $10.7M for global expansion
Fello Raises $25M in Debt and Equity to Expand Agent-Led iBuying Solution
Unreal Estate Raises $6 Million From Cleveland Avenue, KAL Investment Group, Rice Park Capital
I’m ready for this week. Same time next week, same place. Thanks again for reading and be careful! xoxo Mary Ann