Financial Stocks At All-Time Highs…Fintech Venture Mood All-Time Lows
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Good morning…
The financial sector hit all-time highs yesterday. JC has the chart/companies:
I doubt that is bearish, but that is not the point of the post today.
Way back in January 2020, pre COVID, fintech (venture capital) was HOT…and financial stocks were in the toilet (see chart below):
I remember this moment well because Angela Strange at A16z wrote a research piece titled ‘Every Company Will Be A Fintech Company’.
I was happy because financial service disruption had been my focus since we started Social Leverage back in 2008. It was good to get confirmation of the trend from a top tier venture firm, but it also made me cringe a bit because everybody would now jump in the fintech pool. Angela closed with this:
Close to 2,000 fintech companies were launched last year alone. Existing financial institutions might finally be able to replace some of their legacy systems and spend less on maintenance. In addition, they may be able to launch new products more quickly by partnering with some of these startups.
Every company, as we saw with Uber, Lyft, Shopify, Mindbody, should be thinking about how to leverage financial services to better serve their customers, better retain their customers, and drive more margin.
Finally, the really exciting part comes to us as consumers. With new financial services companies spinning up—and some of our favorite brands launching financial services—our existing services are getting better. I believe that in the not-too-distant future, everyone, no matter their socioeconomic demographic, no matter where they live in the world, will have access to affordable financial services, and we might even love them.
What has happened since…
By 2022 fintech peaked. Most of those 2,000 fintech companies/and their investors launched just in 2019 wish they had picked a different sector to attack.
Coinbase and Robinhood got public and between 2020 and 2022 the fintechs that were already public at the time of A16z’s piece had an incredible run (See Square and Paypal).
As the digital ink on Angela’s post dried, fintech public companies bottomed. As you can see from the financial sector ETF chart at the top of the post, it has been nothing but good times.
In the ‘degenerate economy index’ I created last May, 31 percent of my holdings are financial.
Today, I use Apple Pay and love it. I love Robinhood. I think Stripe and Adyen are fantastic. I have a Coinbase account. I use Venmo.
But, if you pitch a venture capitalist a fintech company, assuming you can find a fintech venture capitalist, you will likely hear ‘it’s too damn hard to build a fintech company’.
Which means now is a better time for the right founders to be starting/building fintech businesses. Hit me up.
