SoftBank is an elephant that keeps falling over ๐; Strong dollar poses threats for European (Fin)Techs ๐ณ๐ต; Kim Kardashian's crypto crackdown signals future regulations ๐
You're missing out big time... Weekly Recap ๐
๐ Hey,ย Linas here!ย Welcome back to a ๐ weekly free editionย ๐ of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, itโs the only newsletter you need for all things when Finance meets Tech.
If youโre not a subscriber, hereโs what you missed this week:
Credit Suss, or Lehman Brothers 2.0: a new crash coming? ๐ฑ [deep & solid analysis]
Adyen + Tink, or why the future of payments is open ๐ธ [& why Open Banking is the Next BIG Thing in FinTech since plastic]
The most fascinating charts about BNPL you've probably never seen ๐ [if youโre in BNPL, FinTech, Credit, Lending, etc., this is a goldmine!]
4 Bitcoin charts that will surprise you ๐คฏ [I promise!]
Your FinTech should be much more like Liquid Death, the $700M canned water brand ๐ฆ
The Big VC Pullback everyone was expecting is here and it's bad for startups ๐ [itโs bad news for startups]
Crypto is here to stay. And it's time to talk about MENA ๐ [if youโre in crypto, you cannot ignore this!]
Perfect timing: Mastercard launches crypto anti-fraud tool โฐ
Has crypto died in India? ๐ค [data is both promising & not]
and more!
As for today, here are the 3 FinTech stories that were making a huge difference this week. It certainly was the most interesting week in the FinTech space this year so far, so definitely check out all the above stories.
SoftBank is an elephant that keeps falling over ๐
An edited version of one of SoftBankโs iconic presentations.
The (bad) news ๐ The Vision Fund, a venture capital arm of the investing giant SoftBank, is planning to cut at least 30% of its workforce globally, or circa 150 of the 500 employees, according to a report by Bloomberg.
The news comes nearly two months after I converted SoftBankโs plans to review the organizationโs size and structure which involved some potential cost-cutting.
More on this ๐ It seems that SoftBank is an elephant thatโs trapped in a deep valley, and there are simply not enough unicorns to carry it out:
We can remember that SoftBank recently reported its largest quarterly loss ever.ย Its tech-centric Vision Fund lost a whopping $23 billion in Q2 as tech investments turned sour. This follows a loss of $26 billion the previous quarter, which means that the company lost a whopping ~$50 billion this year so far. All their gains since 2017 have now been wiped out. Ouch ๐ณ
SoftBank was heavily invested inย DoorDash, WeWork,ย Uber, etc., and almost all these investments didnโt pay off.
It recently cut the valuation of its portfolio company Oyo to $2.7B (from $10B). The India-based hotel chain startup is months away from its IPO. Another major readjustment came from Klarna - although it raised $800M in new financing in July at a $6.7B valuation, it went massively down from the $45.6B valuation that SoftBank assigned the company a year ago.
Also, losses were spreadย across SoftBankโs portfolio of 400+ companies, including,ย DiDiย (the Uber of China), and SEAย super appย Grab, among others. The firm has marked down 284 of its portfolios in the latest quarter, including listed corporations and still-private startups.
Why is this important? ๐ค Massive and growing losses, and now brutal layoffs go on to show again that weโre in a completely different market cycle right now. Just recently, Softbank was one of Europeโs most prolific FinTech investors. Today, itโs an elephant that keeps falling over and indicates that the future of FinTech investments will be totally different. Hereโs more on that + the takeaway:
โ๏ธ THE TAKEAWAY
The future outlook isnโt promising? ๐ค SoftBank is probably the largest example of companies struggling with the economic downturn after flourishing in 2021. More importantly, given how widespread its tentacles are, itโs a good illustration of the market itself. The market cycle has changed and it took SoftBank with it. Cutting the workforce by as much as 30% is yet another proof that SoftBank is massively trimming back on its investments. For context, we can remember thatย The Vision Fund approved just $600M in investments from April to June, down from a record $20.6B a year earlier. Thatโs a massive drop in $$$ employed. Hence, itโs more than clear now that we will probably donโt see any big Fin(Tech) backings from Softbank anytime soon. And the future of FinTech investments will be totally different - more selective, driven by fundamentals and not hype or FOMO, and probably with SoftBank watching from the sidelines. The days of crazy FinTech valuations are probably over. For now.
Strong dollar poses threats for European (Fin)Techs ๐ณ๐ต
Whatโs happening? ๐ค European and UK founders have a lot of things to worry about this year. In addition to the energy crisis and rising inflation, the list now includes a sinking currency - in the year to date, the pound is down nearly 15% against the dollar while the euro has lost more than 12% of its value. Ouch! ๐ณ
As itโs visible from the below chart, such a nosedive hasnโt been seen in decades:
Why does this matter? ๐ค This macroeconomic cataclysm will undoubtedly prove incredibly challenging for lots of startups. Yet, for others, there may actually be some benefits amid all the drama.
Hereโs more on that + the takeaway on how the devalued GBP/EUR will affect European (Fin)Tech companies:
โ๏ธ THE TAKEAWAY
Navigating threats & opportunities ๐ First and foremost, we have to talk about the potential takeovers. European and British companies are now vulnerable to being taken over by foreign entities (be it the US or others) taking advantage of both a weak currency and general weakness in equity markets. A case in point here is Arizona-based software giant NortonLifeLock that has purchased antivirus developer Avast last month in a deal worth $8.1B. Furthermore, a weaker euro & pound makes it harder to pay expensive talent in the US. European tech companies have historically struggled to compete with the higher salaries offered by US counterparts - a mismatch that will now be even bigger. Following a similar vein, falling behind their US peers European institutional investors might now get even more risk-averse. This can effectively impact the ability of high-risk companies (i.e. DeepTech) to raise money. On the other hand, there are some opportunities too. Weak European currencies might make it easier for startups to raise money. This is acute for smaller (Fin)Tech companies trying to raise $$$ in the private markets, especially given US VC firms are increasingly expanding their presence in Europe. Also, if youโve recently raised in dollars, youโre very lucky. Those startups that have secured dollar commitments through 2022 now have a great opportunity to leverage USD strength and build their GBP/EUR cash reserves, expanding their operational runway.
Kim Kardashian's crypto crackdown signals future regulations ๐
The trouble๐จ Kim Kardashian has agreed toย payย the US Securities and Exchange Commission a solid $1.3M fine to settle charges related to an Instagram post sheโd made promoting EthereumMax (an altcoin - not ether).
More on his ๐ Kim K used the #ad hashtag but failed to disclose she was paid $250K to promote the coin to her 330M+ followers, which is a violation of the Securities Act. The reality star turned billionaire entrepreneur was also barred from promoting crypto for 3 years. Considering she got paid $250k for the post, $1.3M is a pretty considerable fine.
By the way, the funny thing is that this story was called โthe financial promotion with the single biggest audience reach in historyโ by a UK financial regulator.
But all that reach didnโt stop then-one-month-old EMAX from plummeting in value shortly after Kardashianโs post. Today, an investment in EMAX made at the time of the post would be worth about 95% less ๐ฌ
โ๏ธ THE TAKEAWAY
What does this mean? ๐ค From Matt Damon to LeBron James to Gwyneth Paltrow, celebs have jumped on the crypto bandwagon, with some collecting big checks to promote often questionable digital assets. Regulators are paying more and more attention to celebrity crypto promotions and affiliations now, especially given that scams are proliferating (i.e. crypto scams have cost people $1B+ since last year, with nearly half of the victims saying they first heard about crypto on social media). Zooming out, one thing is clear - although many argue that crypto isn't a security, the SEC increasingly appears to disagree. More importantly, the USโs top regulators are starting to hold it accountable to the same rules. Thus, Kimโs fine is a splashy indication of regulators marking their ground. They are clearly trying to warn all celebrities and influencers that they should think twice before offering financial advice on the blockchain. And thatโs definitely not a bad thing.
๐ What else Iโm watching
OBโs potential ๐ US-Based Allied Market Research has released a new report, revealing that the Open Banking market is expected to be worth $123.7B in 2031. According to a new report published by Allied Market Research, titled, โOpen Banking Market,โ the open banking market was valued at $13.9B in 2020, and is estimated to reach $123.7B by 2031, growing at a CAGR of 22.3% from 2022 to 2031. Still not convinced? Read this: Adyen + Tink, or why the future of payments is open ๐ธ
The pivot ๐ Argentina's state-owned energy company has moved into crypto mining: YPF, Argentina's state-owned energy company, isย supplying powerย to an international crypto mining company with a 1-megawatt operation in southern Argentina. The company plans to launch a second project eight times larger before the end of the year. โWe started to develop this generation pilot for cryptocurrency mining with a vision of sustainability and business from flare natural gas, which cannot be harnessed during exploration and at the beginning of the production of an oil field,โ YPF Luz CEO Martรญn Mandarano said. An indirect buy of the dip? ๐
๐ธ Following the Money
Tennis champions Venus and Serena Williams have invested in European social and community-based investment app Shares and been appointed as the company's first brand ambassadors. Shares is a one-stop platform for any investor to make trades, better manage their portfolio, and discuss opportunities with friends and family. The company has garnered over 150,000 users and become the second most downloaded app in the โFinanceโ category on the App Store and the sixth most downloaded app in the UK since its launch in May 2022. The Williams sistersโ interest in the company comes shortly after Shares closed on a $40M funding round led by Peter Thiel's Valar Fund. Bonus: The future of investing is social? Shares thinks so ๐ธ
London headquartered Toqio has secured โฌ20M for its software-as-a-service model for building embedded banking services.
Global FinTech Circle, the issuer of USD Coin (USDC) and Euro Coin (EUROC), has signed an acquisition deal for merchant and developer-first payments orchestration platform Elements for undisclosed terms.
๐ Thatโs it for today! Thank you for reading and have a relaxing Sunday! And if you enjoyed this newsletter,ย invite your friends and colleagues to sign up: