The Downfall of our Favorite Mythical (Fintech) One-Horned Horse
Unicorns may have just gone from hero to zero. Do you remember the first fintech unicorn as well as we do? The novelty days of Square have long worn off and what are we left with? According to recent reporting from Bloomberg, VCs believe those famed billion dollar valuations are creating a troublesome marketplace for startups and investors alike. With financial services incumbents like Northwestern Mutual (think big banks) needing to expand their tech offerings, the scene is prime for startup M&A, but funding and acquisitions have actually plummeted, according to data from CB Insights.
In just one year enthusiasm for investing in the fintech space has slacked and the numbers prove it. CB Insights found that Q2 funding to VC-backed fintech companies has dropped 49 percent. Furthermore, there were 22 acquisitions in the first half of 2015 and only 16 in the first half of 2016. Investors are growing wary of high valuations, especially as many of those valuations have led to disappointing IPOs, leaving most fintech startups with a rockier road, and potentially less options, than their predecessors.
In an increasingly challenging landscape for getting funding and attracting potential buyers, startups need to demystify their services, hone in on their unique value propositions and instead of aiming for the stars, aim for a realistic valuation.