BI Intelligence
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Initial public offerings (IPOs) have been uncommon among tech companies as a whole for the past few years. That’s because, as private companies’ valuations skyrocketed, many to above the $ 1-billion mark, concerns deepened as to whether they could be matched on the public markets.
Fintech has been no less affected by this drought — in fact, these startups have likely been even more put off than other potential tech IPO candidates by the examples of alt lenders Lending Club and OnDeck, which saw their market valuations decline after going public.
Now, however, the US IPO market is seeing an uptick, largely driven by tech startups. So far, 2017 has seen a total of 11 IPOs by tech startups, well ahead of the four completed in each of the last two years, and just short of 2014’s 12. Companies that have listed so far this year includeCloudera, Mulesoft, Elevate Credit, Okta, Yext, Alteryx, Carvana Netsoft, and Snap — with database software provider MongoDB, valued at $ 1.6 billion, also submitting a filing this week. Most of these companies have a valuation of over $ 1 billion, and thus unicorn status.
Moreover, a promising proportion of these companies seem to be doing well since entering the public markets: Okta’s and Cloudera’s stocks have risen 42% and 19%, respectively, from their IPO prices, for example.
The biggest fintechs will likely closely monitor these recent IPOs to see how they fare. The fintech industry has recently welcomed several new unicorns, including Coinbase and Robinhood, indicating that VCs are confident these startups will be able to exit at lofty valuations. Moreover, several of the largest fintechs have begun streamlining their operations and costs, indicating they are readying to IPO should market conditions remain favorable. These players will likely now bide their time and see how their tech counterparts’ listings go — if these latest IPOs succeed, we may see some of the largest fintechs bite the bullet and also go public.
Most fintechs, even the unicorns, aren’t profitable. Despite having innovative ideas and live products that are successfully disrupting the financial services industry, these fintechs’ business models are increasingly proving to be fundamentally flawed.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on fintech profitability that:
- Explains why the profitability question is increasingly being raised.
- Outlines why fintechs in different segments are failing to turn a profit.
- Gives examples of just how large some fintechs’ losses are.
- Explores how fintechs are striving to solve the profitability problem.
- Outlines vital considerations for fintechs and their investors.
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