Coinbase employees will vaporize champagne during the company’s initial public offering (IPO) on Wednesday, April 14, 2021, outside the Nasdaq MarketSite in New York, United States.
Michael Neagle | Bloomberg | Getty Images
If you have questions about FinTech’s growth, check out the results reports of the two initial public offerings on Tuesday night.
Cryptocurrency exchange Coinbase said its revenue grew 12-fold year-over-year to $ 2.23 billion. Online lender Upstart Holdings says revenue increased 11-fold to $ 194 million a year ago.
These figures are staggering.
To double a year for a company of this size, you have to be in the right place with the right team at the right time, and often need to inject large amounts of capital to acquire new customers. The most successful tech companies in history have never seen a four-digit growth rate when open to the public.
Amazon’s strongest growth was around 300% in 1998, shortly after the IPO. Google’s revenue doubled in the first quarters of the market in 2004 and 2005 and then declined. Facebook never went into triple digits after it was posted.
Even during the 2020 pandemic, Zoom’s growth rate was 369% and Peloton’s growth rate was 232%, the highest when new users flocked to digital work and exercise products.
Unlike what happens in finance, Coinbase and Upstart represent some of the biggest changes happening around the world in public market proxies.
Big banks and investment firms are losing control over consumers. The loans are available from a number of easy to use online services. Emerging banks and credit card companies are killing the fees. The same goes for app-based intermediaries and trading platforms. On the public and private markets, the valuations are astronomical.
Launched in 2015 as a payment service for small businesses, Square is currently worth $ 125 billion and has a portfolio of business, consumer and money transfer services.
Square said last week it was spending $ 29 billion on Afterpay, an Australian retail point-of-loan lending provider. This is one of the biggest tech deals to date, more than Microsoft, Google, Facebook, Amazon, Apple, Oracle, Cisco or Intel have ever contracted.
Eric Jackson, technology investor and president of EMJ Capital, said:
Jackson names Square, Upstart (which he owns), Coinbase, as well as Plaid, where back-end software links bank accounts and fintech apps, and online lender SoFi among the fastest growing companies Did.
“Of course I have prejudices and I think Upstart is the best,” he said.
He made a lot of money with it. Upstart went public in December for $ 20 a share, and Jackson said he had owned it since its IPO. After a 24% increase in after-hours trading on Tuesday, the stock price is currently around $ 160 and the company is worth more than $ 12 billion.
Founded in 2012 by former Google executive David Girouard, Upstart uses machine learning to take out consumer loans and bring this technology to its banking partners. Banking partners can better target their customers. Twenty-five banks and credit unions are currently using the technology, Girouard said in a statement, “the pipeline in the second half of 2021 has a growing list of lenders.”
Online loan boom
According to Upstart, second quarter revenue was up 60% from the previous quarter, with more than $ 100,000 in loans and $ 1 billion in platform origin in the first month of June.
In 2020, the country is in the early stages of a pandemic and much of its economy is closed, so it is not entirely fair to compare the second quarter results with the same period last year. Upstart said in its prospectus that many banking partners have ceased their origins, resulting in lower revenues.
CFO Sanjay Datta reminded investors by phone.
“We’re not going to mention the year-over-year growth in profit and loss this quarter, as the impact of last year’s pandemic combined and everything is well over 1000%,” Datta said.
Yet even with Upstart’s best quarters since last year, revenues have grown by over 200%. Net income was $ 36.3 million, compared to $ 10.1 million in the previous quarter, which was the most profitable quarter.
Coinbase’s story is about the historic growth of crypto investing, even as prices become more volatile.
Second-quarter trading volume grew from $ 28 billion the year before to $ 462 billion. The platform’s assets ranged from $ 26 billion to $ 180 billion. Net income was $ 1.6 billion, an increase of almost 4,900% from the previous year.
“We have seen incredible growth in almost every aspect of users added to the platform, assets on the platform, revenue, etc.,” Coinbase CEO Brian Armstrong said in a statement.
Coinbase went public in April when it was listed directly. With a fully diluted market cap of around $ 77 billion, its valuation has increased almost tenfold since 2018.
Cryptography spreads wealth
Crypto trading is also a key driver for Robin Hood, which launched in July, and is now worth over $ 45 billion, up from around $ 12 billion a year ago. Robin Hood has yet to release its results as a state-owned company, but the prospectus says first-quarter profits rose 309%.
Fintech companies are also very popular in the private market. Eight of the 20 top-rated private tech companies offer financial services, according to research and analytics firm CB Insights.
Payments company Stripe was recently valued at $ 95 billion. Sweden’s Klarna, a competitor to Afterpay and Affirm on point-of-sale loans, is worth $ 45.6 billion. Revolut, a UK money transfer and investment app, is worth $ 33 billion and Brazilian digital banking company Nubank is worth $ 30 billion.
Further down the list, online banking provider Chime ultimately raised a valuation of $ 14.5 billion, and Visa planned to buy Plaid before the deal closes, worth $ 13.4 billion. dollars.
There may be bubbles. And the hype in some areas is certainly way beyond reality.
But as the financial results show, consumer expectations are changing as fast as the flow of money. There’s a reason JPMorgan Chase CEO Jamie Dimon warned shareholders in an annual letter in April that “banks are playing an increasingly smaller role in the financial system.”
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