The fintech industry has taken a beating recently. Rising inflation, Russia’s invasion of Ukraine and the aftermath of the pandemic have plunged global markets into a period of uncertainty.
Financial services innovators are feeling the pressure. Cash has become harder to raise. Investors have grown reluctant to open their cheque books to the gigantic levels of the last decade. Companies like Fast that shot through the stratosphere on the wave of hot money crashed and burned this spring when capital started to dry up. Publicly traded fintech companies have also seen their shares plunge in a similar manner.
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Against that background, it’s encouraging to see ventures beat the dip and raise fresh capital. SumUp is the latest fintech to do so, having just added €590m to its balance sheet in a new funding round. The cashflow management app secured a €8bn valuation on the back of the raise. The scaleup has now raised over €1.5bn in funding since its launch in 2012.
“I am very proud of the team for completing a successful financing round in the current market with marquee investors – it’s indicative of our strength, execution, and potential,” said Marc-Alexander Christ, SumUp co-founder and CFO. “The funds we’ve raised will enable us to continue to build out our product ecosystem, expand into new markets, pursue value-adding acquisitions, and continue leveling the playing field for small merchants at a global scale.”
Bain Capital Tech Opportunities led the raise. Darren Abrahamson, managing director at the venture capital firm, said the investor had been impressed by SumUp’s ability “to empower a growing and diverse field of small businesses with payment solutions and tools to efficiently connect with their everyday consumers.”
BlackRock, btov Partners, Centerbridge, Crestline, Fin Capital, and Sentinel Dome Partners were among the other backers injecting cash into the €590m funding round raised by SumUp. The round is a combination of debt and equity.
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By GlobalDataThe €590m funding round raised by SumUp will enable the company to expand on a global scale. The company is today available in 35 countries and employs over 3,000 people.
The SumUp €590m funding round beats the trend
SumUp’s new cash injection runs counter to the overall mood of the fintech industry of late. After ballooning over the course of the coronavirus crisis, the sector is now rapidly deflating.
Falling investment levels are a clear indication of this trend. Fintech companies raised a record $84.5bn across 2,356 venture capital deals in 2021, according to data from research firm GlobalData. That’s up from the $30.7bn raised in 2020 across 1,772 deals.
While there has been a marked slowdown in VC deals this year, the industry looks set to still top the levels seen in 2020. So far, the fintech industry has raised $23.9bn across 750 deals in 2022.
Celebrated champions of the market like Swedish buy-now-pay-later (BNPL) company Klarna have been caught in the downpour. Having achieved a $46.5bn valuation last year on the back of a $639m funding round, the quadradecacorn could now be about to endure a humbling downround. Newspapers reported in June that Klarna is looking to raise a $500m funding round at a $15bn valuation. The news comes after Klarna announced plans to cut 10% of its workforce due to the changing market conditions.
Klarna is not alone in sacking staff. Payment processing startup Bolt, mortgage broker Better.com and tax credit venture MainStreet are just three other fintech firms forced to fire workers this year.
Publicly traded fintech companies have also taken a battering. Klarna rival Affirm has lost more than 80% of its market cap since its peak in November. BNPL business Laybuy has similarly fallen from an high of A$2.00 to a price of A$0.05.
Industry incumbent PayPal has fallen from a $308 five-year high in July last year to be trading at $72.97 at the time of writing. Twitter founder Jack Dorsey's payment giant company Block, previously known as Square, has seen its shares fallen from $276 in February 2021 to $60.63 in June 2022.
The cryptocurrency industry's ongoing woes is similarly linked to the downturn. Crypto champions Crypto.com and Coinbase face similar difficulties as the value of digital assets like bitcoin continues to crash.
GlobalData is the parent company of Verdict and its sister publications.
