It’s an excellent time to be a fintech-focused VC. Over the previous six months in Europe, there have been €22.6bn price of exits, making lots of traders mighty wealthy, based on PitchBook information.
Among the many greatest exits had been Sensible’s £8bn direct itemizing and Visa’s deliberate acquisitions of Tink for €1.8bn and Currencycloud for £700m.
€22.6bn is already an all-time file and compares to lower than $2bn in 2020, the place there was an sudden dearth in M&A exercise.
The info paints an image of spectacular value tags and a maturing sector, constructing on high of a robust 12 months of fundraising.
The big variety of exits is nice information for traders and founders alike, with VCs seeking to reinvest their returns again into the ecosystem.
Among the many VCs who’re celebrating this 12 months can be Tink backers Eurazeo Development and Daybreak Capital, in addition to Valar Ventures, who was one in all Sensible’s high traders.
The exit practice has additionally taken off exterior of Europe. PitchBook exhibits that the primary half of 2021 has already been twice as profitable as 2020 for fintech exits globally.
In complete, fintech exits banked VCs $70bn between January and July globally, concentrated in main public listings like Coinbase. Round 20% of the worldwide exit determine got here from Europe.
A breakdown of the information exhibits that a lot of the fintech consolidation in 2021 has occurred within the B2B phase.
Among the many high acquisitions had been Tink, Contis (which not too long ago bought to Solarisbank) and Nowo. These broadly embody the unglamorous however worthwhile world of economic administration, funds, software programming interface (API) connectivity and banking-as-a-service.
B2B acquisitions make sense for older corporations who wanted to modernise rapidly throughout the pandemic, says Paul Cuatrecasas, the CEO of boutique M&A agency Aquaa.
“The pandemic created a digital tidal wave. If you weren’t digital earlier than the wave hit, you then needed to purchase one thing to develop into extra digital as soon as the wave hit, even because the tide rose,” he tells Sifted.
B2B fintechs have additionally confirmed extra widespread on the funding facet, overtaking funding into shopper startups final 12 months to develop into the brand new ‘el dorado’.
Nonetheless, shopper fintechs nonetheless have their very own enchantment as potential acquisition merchandise, based on a16z normal associate Anish Acharya.
“I believe the very best corporations personal distribution not product… These merchandise will not be that subtle, what’s subtle is the attain that corporations [like Plaid and etrade] have,” he mentioned final 12 months on the a16z podcast.
“For the primary time, fintech startups are on the scale that they’ll really signify a brand new progress curve for incumbents,” he added, commenting on the burst of fintech M&A seen within the US final 12 months.
Saying that, digital banks are but to edge in the direction of consolidation. Though there at the moment are 300+ digital banks worldwide, little or no M&A has materialised right here in Europe or past (except for JP Morgan’s current buy of Brazil’s C6). A report final 12 months by Finch Capital blamed this on an absence of “large daring consumers” in fintech.
Extra within the pipeline
2021 may nonetheless ship one other wave of exits earlier than it’s over.
IPOs rumours are already swirling round Sweden’s Klarna itemizing for north of $33bn. Others anticipated to be courting the general public markets are Trustly and Interactive Traders.
There are additionally a number of key consumers on the acquisition hunt.
Firstly, SPAC sponsors wish to purchase (and checklist) Europe’s fintech unicorns. Whereas many of the SPACs are primarily based within the US, Europe additionally welcomed its first fintech-focused SPAC in EFIC1 not too long ago. That might immediate an exit of a minimum of $1bn, following within the footsteps of eToro.
“[SPACs] may positively create alternatives for… [smaller] candidates resembling Qonto or Solaris,” says Claire Calmejane, chief innovation officer at Societe Generale.
In the meantime, massive monetary establishments — from banks, to PayPal, Visa and Mastercard — are anticipated to ramp up their M&A budgets within the post-Covid, digital world. That is prone to deal with options like digital wealth merchandise or technological enhancements.
One other potential set of consumers could possibly be massive Chinese language companies. Earlier this 12 months, Sifted reported that Chinese language strategic traders had been more and more eyeing European fintechs. That pattern may now properly department into acquisitions (pending regulatory approval).
Lastly, intra-fintech M&A could possibly be on the playing cards. Among the many native fintechs who’ve publicly acknowledged their intention to purchase their friends are Revolut, Bunq, Starling and N26.
There have been over 30 intra-fintech acquisitions globally in 2020, notably within the remittances area, based on TNW’s Index.
“To stay related in a world the place digital disruption guidelines, these fintech gamers should use acquisition as a method to stay related, improve scale and never develop into a takeover goal themselves,” says Aquua’s Cuatrecasas.
The query now can be: will their desired startups agree — or be compelled — to promote?
The exit leaderboard
Whereas 2021 has been a blockbuster 12 months, profitable fintech exits aren’t completely novel.
Between 2013 and 2019, European fintechs pulled in €83bn through preliminary public choices or acquisitions, based on one Dealroom report. A lot of that was concentrated in cost corporations, like Adyen and WorldPay.
By means of context, the highest 10 exits within the fintech area ever are as follows:
*Appendix: Fintech exit volumes on a world foundation