Lindsay Davis Sep 8, 2022 15 min read

Fintech Finflation

Hi there ­­🙋🏼‍♀️,

Welcome back to the Atomic Intelligence newsletter after the long Labor Day Weekend. This Summer we’ve seen egg prices cracking benchmark levels, natural gas costs driving shocking electricity bills, and higher interest rates making buying an apartment untenable.

If inflation is affecting every industry, I couldn’t help but wonder… what does “fin-flation” mean for the fintech industry?

Fintech funding fumbles

The condensed version is that fintech is also going through leaner times under tense economic pressures. Digging into the latest fintech report from CB Insights, my alma mater, quarterly funding plummeted to $20.4B in Q2’22, down 33% quarter-over-quarter (QoQ) and 46% year-over-year (YoY). Deals also fell 17% QoQ to 1,225 in Q2’22. The quarterly drop is steep when reflecting on Q1’22, when investments in VC-backed fintech firms dominated prior records in funding, deals, exits, and mega-rounds.

Indeed, venture capitalists (VCs) have slowed investments amid market volatility and recessionary pressure.

Screen Shot 2022-09-02 at 2.46.27 AM

Other factors impacting the cooldown are fewer $100M+ mega-rounds and down rounds, or rounds at a valuation lower than the previous round. Unicorn darlings such as Klarna, an early leader in the buy-now-pay-later sector, raised at 85% discount with its valuation dropping to under $7B from roughly $46B. Several fintech companies that rushed to IPO are also trading well below their pre-IPO price.

For startups raising with previous round valuations at 100X+ revenues, lower unicorn comparables will reset funding benchmarks, signaling more down rounds are imminent in a tighter funding environment. Alternatively, some companies are preserving cash by scaling back on headcount. Regardless, the downturn has been a catalyst for demand, and competitors with capital on hand are in a prime position to capture market share.

The crown jewel of venture

As the formerly disgraced WeWork co-founder Adam Neumann has proven with his recent $350M raise, you can bounce back from almost anything, and there are several brighter spots ahead in fintech.

You may recall that in Q2’21, $1 of every $5 in venture investments went to the fintech sector.

Despite a broader pullback in venture investments globally, fintech remains the crown jewel for VCs, still accounting for ~20% of the $250.1B raised in the first half of 2022.

There is available capital and there has been no slowdown in new firms and fund announcements. Already, 2022 is the second largest year for fintech since 2018, but is projected to fall below 2021’s record. Deals also remain above pre-pandemic levels and are projected to set an annual record, assuming early-stage investments continue to pick up and well-capitalized funds find cheaper rounds.

Fintech’s time to build

While the data signals lower price and valuation expectations for founders, it’s a positive signal deals are getting done, albeit unlikely this week during the Burning Man festival. I’m personally optimistic about the pickup in early-stage deals. Borrowing from Winston Churchill and Andreessen Horowitz, it’s exciting to see founders seizing the crisis as an opportunity to start something new and secure funds to build.

At Atomic, we’ve been channeling that “time to build” mentality and in this edition of the Atomic Intelligence newsletter, share what we’ve been up to, including:

  • August solutions upgrades and highlights from the conversion conversation
  • Why Verify is the automated, pain-free way to validate income and employment data
  • Where to meet us this fall including at Finovate and my next round in the Fintech Fight Club ring and our session at the MX Money Summit
  • Podcasts where Jordan shares how to Think Like a Leader and Bank on It

Have a great week,



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