The State of Fintech M&A going into 2025Finance and technology have the most interesting intersection. You would think that driving fees and costs would erode competition. But every week, every month I see so many different types of fintech deals. I recommend following @FTPartners who provides excellent fintech deal updates. Below I summarize some of the data their team published regarding recent fintech activity. Fintech YTD Insights for 2024Since the FTC has been roadblocking major Big Tech deals, I have been following M&A deals closely in 2024. Outside of Big Tech, the deal activity is healthy and robust. Below you can see that 2024 YTD has already surpassed 2023 numbers. However one red flag for me has been the silent IPO market. It's great to see that private financings have stabilized since 2021. But the massive decrease in IPOs is a capital markets problem. On the surface, VCs will argue that private financing are better et al. But investors don't want to hear that. First, private market valuations are mispriced with a smaller investor group. The public markets are designed to create real-time pricing with thousands of investors. VCs don't want to be fact-checked by the market. Second, the public markets offer more value for great companies. Major companies like Visa, Blackrock and the Nasdaq have all benefited greatly as public companies. The public markets provide significant liquidity, which means you can access more equity and debt financing products. I have extensively discussed this problem regarding Stripe in the past. Will Fintech IPOs happen in 2025?To be honest, I thought the IPO would be firing on a all cylinders right now. For example, I wrote about two fintech deals this month; the Envestnet Buyout and OneStream IPO. Both showing positive signs for investor appetite. If you look at the financing activity below, you'll see it's quite healthy across all verticals. In fact, every time I look at these financing activities, I'm surprised by how much is happening within banking & lending. These sectors continue to dominate in terms of size. However, it is worth noting that 812 crypto deals have been financed this year alone. I think crypto deal flow will pick up in 2025 for two reasons:
If you look at the chart above, I think we are reaching an inflection point. It's very likely that the $ amount raised will surpass $5b in 2025. The change in U.S. Administration will be the catalyst here. Plus a two-year gap indicates that investors are preparing for something. Fintech 2024 SummaryThe fintech markets look healthy. Most of my attention is on investing and trading technologies, which have performed well this year. After this election cycle is over, I think we will see a massive revival in the capital markets. The financing numbers will look similar to the 2018-2019 era. Two recent deals that caught my attention were Wonder’s acquisition of Grubhub and Klarna’s plan for IPO. Food delivery apps have proven to be successful yet competitive. Wonder has a retail-first business model, giving it a competitive advantage over UberEats and DoorDash. Klarna is capitalizing on the Buy-Now-Pay-Later trend, market consolidation and ramp up in financing. A successful IPO will benefit everybody in the industry. If you are thinking about entering the industry, I recommend starting with crypto, blockchain and payments. However the real opportunities will be with insurtech and healthtech. Those two industries have more archaic and evolving payment problems. Financial APIs for either, especially commercial insurance, will be very valuable to unlock.
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