The Wounded Unicorns Of Fintech

For EBusiness & Channel Strategy Professionals
The Wounded Unicorns Of Fintech
Falling Valuations Don’t Mean You Should Give Up On Financial Technology
August 1, 2016
Fintech Unicorns Are Wounded
The tech industry has been giddy with investment. Betting on massive shifts in consumer and business
spending from traditional to new digital companies, private investors poured $127 billion into tech
startups between 2012 and 2015. 1 Financial technology has been no different, with sky-high valuations
of public and private fintech companies and the emergence of more than a dozen unicorns — private
tech companies that investors valued at more than $1 billion (see Figure 1). 2 But now, devaluations and
post-stock collapses are affecting startups in (see Figure 2):
››
Lending. Peer-to-peer (P2P) lending platform Lending Club was valued at $5.4 billion in its
December 2014 initial public offering (IPO). 3 At one point, the company’s value rose above $10
billion. 4 By June 2016, worries about regulatory clampdown, the drying up of institutional finance,
and internal control issues had reduced the value of the company to $1.9 billion and cost the CEO
his job. 5 Similarly, shares of small business lender OnDeck have plunged by nearly 80% since its
IPO in November 2014. 6 Online lenders Lufax in China and Elevate, LoanDepot, and SoFi in the US
have all postponed their IPOs in response. 7
››
Payments. Mobile point-of-sale pioneer Square went public in November 2015, although the
firm’s debut market cap of $4.3 billion fell short of expectations — Square’s last private funding
round had suggested a $6 billion valuation. 8 By June 2016, the firm’s market cap was only $3
billion. 9 Stripe, another highly valued US payments startup, has yet to go public despite its $5
billion valuation. 10
› › Insurance. Zenefits — which offers businesses cloud-based software to manage payroll, health
insurance, and other benefits — was valued at $4.5 billion in May 2015. 11 Since then, Fidelity,
which led the funding round, has written down the value of its investment. 12 Fidelity now estimates
Zenefits’s share price at $5.60 — down from $14.90 a year earlier. 13
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