Weekly update #55

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 and the VC industry.

The latest episode of Builders has been released this week. In this episode, I sit down with Anthony Danon, CEO and co-founder at Rerail, to talk about the Venture Capital landscape globally, the new challenges in fintech and the concept of collaborative investing.

Anthony comes from a long experience both in fintech and venture capital, in companies like Anthemis Group, Speedinvest, but also with a strong investing experience in fintech giants like TrueLayer, Tide and more recently the launch of Cocoa Venture Fund I.

You can find the complete video interview here on YouTube, or you can listen to the podcast here on Spotify or here on Apple Podcast.

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!

Coming back to us, this week I read an interesting report from McKinsey & Company , more specifically the Global Banking Annual Review 2024, titled “Attaining escape velocity”. The report is a study conducted in both 2023 and 2024 in the banking industry, trying to understand the main drivers that are guiding the growth. Here my main takeaways:

There’s some comfort in the saying that it’s not the end if things aren’t fine. But lately, banking has been more than fine—raising questions about the long-term outlook. Over the past two years, the banking sector has seen its best performance since before the Great Recession. Global banks brought in $7 trillion in revenue and $1.1 trillion in net income, with return on tangible equity (ROTE) hitting 11.7 percent. Capital levels have stabilized at a robust 12.8 percent (common equity tier one capital as a share of risk-weighted assets), and liquidity has improved to 77.2 percent, marking gains over 2022. Remarkably, banking has generated more profit than any other sector worldwide.

The recent improvement in banking returns may be temporary. Although the industry has successfully cut costs and maintained strong credit quality, much of the gains in returns since 2021 seem primarily driven by rising interest rates. Models suggest that without this rate support, the industry’s return on tangible equity (ROTE) in many regions would have hovered around 8 percent, below the cost of capital. If interest rates fall from current levels, as some scenarios predict, banking ROTE could revert to approximately the cost of equity within the next two years.

Regional differences may shape these outcomes, with factors like local inflation and the pace of rate reductions playing key roles. Yet, if global interest rates do decline as forecasted, net interest margins (NIMs) could compress by 50 to 60 basis points, dropping from just above 3.1 percent in 2023 to around 2.7 percent by 2030. Should this happen, the recent economic profit growth stemming from high interest rates would likely taper off, causing ROTEs to drift closer to the cost of capital once again.

This is surely my favorite graphic by far. Banks may not be able to rely on productivity gains or scale advantages to boost margins. While AI holds potential in that direction, it hasn’t yet delivered transformative change. However, recent reports from some leading banks show early efficiency gains from AI, with some achieving billions of dollars in savings, equating to about a percentage point in efficiency ratios. Despite global technology spending by banks totaling around $600 billion to drive productivity, labor productivity in key markets, such as the United States, is actually declining.

AI may shift this trend, but for now, most banks are still in the pilot stage with generative AI, cautiously balancing additional investment and regulatory compliance. A few leading banks are moving beyond pilots to an integrated approach, applying AI and generative AI across entire domains, which may eventually show meaningful productivity gains.

Globally, banking also lacks consistent scale economies, with scale effects more pronounced in specific niches, such as retirement record-keeping and certain capital market areas. Consequently, neither increased tech spending nor sheer size has meaningfully shifted the cost curve to generate additional margin.

Further, improving margins through cost-cutting may be limited. To maintain current returns on tangible equity under certain macroeconomic conditions, the industry would need to cut costs per asset by 5 percent annually—a significant jump from the historical 1 percent reduction rate per year.

Anyway we saw some very interesting news in the market this week. Klarna has finally filed for the IPO in the US, Qonto aims for a $5 billion valuation in a secondary shares sale, and Revolut to expand crypto offering in 30 markets. Also, the Italian government sold a stake in Banca Monte dei Paschi di Siena for $1.1 billion, FTX is suing Binance over the collapsed deal in 2021, and Visa launched flexible credentials with Affirm . In the VC industry, Founderful launched a $140 million fund, Bek Ventures launched a third fund for a total of $250 million, Italian VC The Techshop SGR closes its first fund at $53 million. But also Bynd Venture Capital , Maki.vc, Altos Ventures and Intudo with new funds in the market. In the italian ecosystem, we saw the fintech unicorn Satispay raising a new $60 million funding round. And finally, some very interesting rounds from fintech startups like Tomorrow, Ualá, SmartBank, Pemo, Affiniti, Wyden, Neo Financial, Tranched and many others.

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

Closed deals

• Amsterdam based Pantheon Mining raised $1 million in seed funding to expand its mining operations in Europe
• Hamburg-based fintech Tomorrow raised just below $5 million in a new funding round
• Argentine fintech Ualá secured a $300 million series E at a $2.75 billion total valuation
• Lyon-based Agicap closes a $45 million series C round to redefine treasury management
• Canadian neobank Neo Financial raises a CAD $360 million Series D round
• Brazilian fintech Tako emerges from stealth with a $13.2 million seed round
• big xyt secures a first external $10 million funding round led by Finch Capital
• Riyadh-based Lean Technologies secured $67.5 million series B round
• Vega closes a $20 million series A led by Apollo Global Management, Inc.
• Tokyo based SmartBank raises a $26 million round for its personal finance management app
• UAE based fintech Pemo secures a $7 million pre-series A and reach $1.4 billion in transactions
• Fintech startup Talli secures a $4 million funding round to innovate legal payments
• Brazilian fintech Stay secured $2.6 million in a seed round to expand private pension offering
• Tranched secures a $3.4 million funding round led by Speedinvest to simplify asset-based financing process
• MODIFI secures a $15 million funding round and strikes a partnership with Sumitomo Mitsui Banking Corporation – SMBC Group
• Affiniti raises a $62 million funding round to back US's small and medium businesses
• Zurich based Wyden secures a $16.9 million series B funding round
• London based Tangible raises a $4 million round to help hardware companies access the debt market
• Mexican fintech Cometa raises a $12 million funding round to expand its presence in Mexico
• Morgan Stanley invests $20 million in fintech startup NovoPayment
• Spanish fintech seQura sets a new record of $410 million in funding, including both equity and debt

Insights on the VC industry

• Former Raya executive is raising a $8 million new fund to invest in consumer tech
• Lisbon based VC Bynd Venture Capital has launched a $40 million fund to support Iberian tech startups
• Arzan Venture Capital launches Revenya Capital
• Italian VC The Techshop SGR closes its first fund with $53 million in commitments
• Maki.vc closed a third $100 million fund to invest in Nordics early stage startups
• Indonesian VC Intudo closes two new funds for a total of $125 million
• Swiss VC Founderful raises a second $140 million fund
• Bek Ventures, previously known as Earlybird Digital East Fund, has launched a $250 million Fund III
• Altos Ventures secured a $500 million new fund

News on the market

• Qonto is aiming for a $5 billion valuation as it plans for a $200 million secondary share sale
• Visa invests in four African fintech startups as part of its commitment in the region
• SIX Group agrees to buy Aquis Exchange
• FTX is going to sue Binance for $1.76 billion over the 2021 collapsed deal
• Breaking news, now it's finally official. Klarna confidentially filed for an IPO in the US
• Kaiko agrees to acquires Vinter, a Kaiko company, Europe's leading crypto index provider
• Visa flexible credentials goes live in the US in partnership with Affirm
• Banco BPM and ANIMA Holding buy the Italian government's stake in Banca Monte dei Paschi di Siena for $1.1 billion.
• Revolut expands crypto offering to 30 new markets in Europe
• BANCOMAT S.p.A., Bizum, and MB WAY have launched EuroPA, an interoperability payment method through instant transactions

A special look in the Italian market

• Italian fintech Satispay raises $60 million in a new funding round

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

Events you don’t want to miss

• Web summit | Lisbon 11-14.11.2024 (Link to the invite or website)
• FTT Fintech festival | London 11-12.11.2024 (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.
• 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.

• 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 #54