If there has never been a golden age for fintech, it must surely be now. In the first quarter of 2021, the number of fintech startups in the United States crossed 10,000 for the first time, well over double if you include the EMEA and APAC region. There are now three fintech companies worth over $ 100 billion (Paypal, Square and Shopify), with three more in the $ 50 billion to $ 100 billion club (Stripe, Adyen and Coinbase).
Yet, as fintech companies have started going public, there has been quite a bit of uncertainty about how these companies will be valued in public markets. This is because fintechs are relatively new to the IPO scene compared to their mainstream internet or enterprise software counterparts. Additionally, fintechs use a wide variety of business models: some are transactional, others are recurring, or have hybrid business models.
Additionally, fintechs now have a plethora of options as to how they choose to go public. They can take the traditional route of the IPO, pursue a direct listing, or merge with a PSPC. Given the multitude of variables at play, evaluating these companies and then forecasting how the public market will perform is anything but simple.
It is important to note that fintech is a complex category with many different types of players, and that not all fintech are created equal.
The fintech gold rush has arrived
For much of the past two decades, fintech as a category has been very quiet in public markets. But that started to change dramatically in the mid-2010s. Fintech had clearly arrived in 2015, with Square and Shopify going public that year. Last year was a banner year with eight fintech IPOs, and there was no slowdown in 2021 – the first four months have already produced seven IPOs. We estimate that more than 15 additional fintech companies could go public this year. The current record will almost certainly be broken long before the end of the year.