Weekly update #49

Welcome to this edition of the weekly newsletter. The idea behind this is to gather all the information in the startup ecosystem in one place, with a special focus on the fintech market.

The next episode of Builders will be out next week. I will have a very special guest from one of the most active fintech VC in Europe. But, in the meanwhile, you can recover the last episode by watching the video here on Youtube, or the podcast here on Spotify or here on ApplePodcast.

As always, if you are a VC manager or a founder and want to be the next guest on the podcast feel free to send me a message on LinkedIn!

Another very interesting event this week, as I will be on stage at Milan Fintech Summit on the 9th of October, speaking with Alessandro Giovanelli , country manager Italy of Swan. We will be speaking about the open banking market in the country and the evolution towards the concept of embedded finance.

Coming back to us, I read a very interesting report this week, the “Status of European Fintech 2024” from Finch Capital. The report is an overview into the expanding influence of FinTech in Europe, trying to concentrate on macro factors within the European FinTech sector, including exit dynamics, valuations, funding growth, and what we anticipate will be the key trends for the coming year. Here my main takeaways.

The year 2024 remained turbulent for European FinTech. Despite a continued decline in funding, the sector has demonstrated increased resilience with some positive signs emerging on the horizon. European FinTech maintained a thriving mid-market M&A scene, nearly matching that of the United States. However, as one of Europe's largest sectors, it still needs to prove it can consistently produce unicorn exits. The UK's dominance in the European ecosystem has intensified, now capturing 65% of the sector's funding.

Key observations include a 25% drop in funding due to fewer deals entering the market and a reduced need for funding as companies focus on profitability. Higher interest rates have led to record profits for challenger banks and attracted large funding rounds for firms like Monzo and Revolut, boosting overall funding alongside the end of the crypto winter. Growth companies with higher EBITDA margins are achieving higher revenue multiples—over 10 times—with more emphasis now placed on EBITDA margin than on revenue growth. The pursuit of unicorns has subdued, yet the European market for low to mid-market M&A remains strong, nearly matching the size of the U.S., although large-cap deals are two to three times smaller. A competitive battle is unfolding as incumbents aggressively hire tech talent more than FinTech companies.

Banking continues to be the most mature sub-sector, with a select few emerging leaders attracting the bulk of available funding. While the Wealth and Crypto sectors are gaining significant attention and offer a variety of early-stage investment opportunities, clear winners have yet to emerge. Lending and Mortgage sectors are still in the process of recovering from the rise in interest rates.

The highest-valued companies have +40% EBITDA margins and 10-40% year-on-year revenue growth

While the Rule of 40 tends to drive valuations in more established sectors like Banking and Payments, the volatile nature of Crypto doesn’t adhere to this metric.

Traditionally resilient sectors like Payments and Challenger Banks are experiencing a downturn, losing their leading positions to Crypto and Lending sectors, which have benefited from valuation benchmarks set in 2022. Investors from the U.S., Asia, and strategic sectors are pulling back significantly, participating in 50% to 100% fewer deals compared to last year.

The European FinTech sector has entered a pivotal phase in 2023, often described as the "year of reckoning." A renewed emphasis on funding discipline has led to a flight to quality investments and a heightened focus on profitability for survival across the entire ecosystem. Funding has plummeted by 70%, returning to pre-2020 levels, largely due to the end of mega funding rounds and investors prioritizing quality over quantity.

Anyway we saw some very interesting news in the market this week. Revolut is launching personal loans in Italy, TrueLayer raised another round, Mastercard acquired Swedish startup Minna Technologies, but I think that the biggest news of the week still remains the huge round closed by OpenAI, $6.6 billion at a $157 billion valuation, perhaps the biggest round ever. In the VC industry, DCVC raised $700 million for multiple new funds, while boldstart ventures closed a $250 million fund and Asabys Partners a $180 million fund. But there were also Era Ventures , MITO Technology and KYIP Capital SGR raising money to invest in the ecosystem. In the Italian market, we saw a wonderful partnership between CDP Cassa Depositi e Prestiti and OpenAI, with the US AI giant that will help the Italian fund to invest and push AI Italian startups. Finally, some very interesting funding rounds from fintech startups like Mifundo, Carmoola, Formality, Plumery, Sleek, Care.fi, Lendistry, AMLYZE, KOHO and many others.

But let's take a closer look at the main news of the last seven days:

Closed deals

• Tallinn based Mifundo raises a €10 million round to build a platform for portable credit profiles
• Business intelligence platform Zenlytic raised a $9 million series A to scale its AI data analyst
• UK based fintech Carmoola secures a $100 million debt deal with NatWest
• Indian fintech Care.fi secured INR 8 crore in debt funding to offer financial services in healthcare in the country
• Athena Fintech Solution JSC secures AU$25 for its series B
• Celestia Labs Foundation raised $100 million in funding round led by Bain Capital
• California based Lendistry secures a $5 million investment from City National Bank to back small entrepreneurs in the US
• Primo Ventures invests $1 million in crypto startup CryptoBooks
• Singapore based Sleek secures $5 million in debt financing led by Fintech Nation Fund
• FX HedgePool raises a $8 million funding round to innovate currency exchange flows globally
• Formality raises $8 million to simplify contract management with AI
• The news was in the air for a while, but now it's official. OpenAI raises $6.6 billion at a staggering $157 billion valuation
• Dutch fintech Plumery raises $3.3 million from DN Capital and Fontes
• AI startup poolside raises a $500 million series B round led by Bain Capital
• BMLL raises a $21 million series B for its analytic data platform for global equity and futures markets
• AMLYZE raises a $2.3 million seed round to transform anti-financial crime landscape
• RD Technologies raises $7.8 million to expand its fintech bridge between Web2 and Web3
• Open banking provider TrueLayer raises $50 million as extension of their $130 million Series E
• Canadian fintech KOHO secures a $190 million round in both cash and equity to fuel expansion and get a banking license

Insights on the VC industry

• MITO Technology unveiled a $50 million fund to invest in climatech
• Asabys Partners closes a second fund at $180 million to invest in life sciences
• Scope is launching a $50 million VC fund to invest in fintech and gaming
• Miami based boldstart ventures raised $250 million for its seventh fund
• KYIP Capital SGR closes at $30 million for its new KIM fund
• European Investment Fund (EIF) and the Hungarian NCH Capital jointly launched Impact Ventures III, a $40 million new VC fund
• NY based VC Era Ventures launches its inaugural $88 million fund
• DCVC closes over $700 million in new VC funds

News on the market

• Revolut is launching personal in Italy
• inDrive expands its services in LATAM by launching inDrive Money, its first fintech product in Colombia
• Mastercard acquires Swedish startup Minna Technologies
• Banco BPM, Gruppo BCC Iccrea and FSI come together to launch Numia S.p.A., now Italy's second largest player in e-payments
• NCR Voyix sells its digital banking unit to Veritas Capital for $2.45 billion
• Pagaya upsize its exchangeable senior note offering to $140 million
• Silicon Valley based VC CRV returns $275 million out of its $500 million fund to investors, citing overvaluation of mature startups
• Klarna Checkout becomes a stand alone company and rebrands as Kustom
• Woolsocks - The money app announced the acquisition of the loyalty program app OK
• Revolut slams Meta over approach on financial scams on the platform
• Molten Ventures acquires 97% of Connect Ventures Fund I for $18.6 million

A special look in the Italian market

• Following Sam Altman attendance at Italian Tech Week last week, today CDP Cassa Depositi e Prestiti and OpenAI signed an agreement to promote AI in Italy

And here some useful resources for everyone involved in the ecosystem:

Events you don’t want to miss

• Bits & Pretzels founders festival | Munich 29.09-01.10.2024 (Link to the invite or website)
• Milan Fintech Summit | Milan - 08-09.10.2024 (Link to the invite or website)
• VDS+ | Valencia 23-24.10.2024 (Link to the invite or website)

You have a cool event you want to mention or to sponsor? Feel free to send me a DM.

Startups raising funds

• Loyyal - Loyalty platform from the MENA region, with entities in the US and South East Asia, provides a B2B2C platform to handle multiple loyalty programs and earn rewards all over the world. Raising a $6M Series A
• Freedhome - Proptech and fintech platform, enabling people to be able to gain profit from real estate by renting them to intermediaries. Raising a $1M seed round

• PopulaRise - The platform that allows companies of every dimension to promote themselves on social media through the collaboration with their clients. B2B2C SaaS. Raising $1M.
• Tutornow - Edtech that provides an online tutoring platform for students with learning disorders. Raising $500k to $1M.
• Recivu - Fintech  startup trying to digitize the receipt flow by getting rid of papers. Looking for $150k in SAFE, already $50k committed.
• Weagle - B2B Tech startup that provides the very first browser designed for company, with total security for sensitive data. Raising $6 millions for their seed round.

• Reach Finance - Reach is the fintech platform for wealth accumulation for the Y&Z generations, they provide users with the tools to build wealth such as a budget tracker, a financial plan and a systematization of investments. Looking for $700k, with already $500k committed.
• wrapp.ai - A fintech startups that offers a virtual accountant and CFO that can help SMEs scale globally. Looking for $1 million, $750k already granted from public funds, looking to close the last $350k.
• Shoppy Code:Gift card platform that offers a points based loyalty program. They share part of the profits coming from marketing budgets with their customers. Raising $500k.

Take also a look at the last edition of the newsletter, Weekly update #48