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Fintech Valuations Have Grown Red-Hot

Fintech

On December 8, 2021, one of the most anticipated U.S.-listed initial public offerings from a fintech company took place. The Brazilian startup Nu Holdings Ltd (NYSE:NU), heralded as the largest digital bank in the world by number of member accounts, went public after listing on the New York Stock Exchange.

As expected,  NuBank’s IPO boomed, with NU shares soaring to $11.25 in its opening trade after raising ~$2.6B in its initial public offering, giving the company a market capitalization of nearly US$52 billion and making it the third most valuable listed company in Brazil.

Perhaps not surprisingly, NuBank is backed by several high-profile investors, including Berkshire Hathaway (NYSE:BRK.B) (NYSE:BRK.A) which  invested $500M in the company in June, and Tencent (OTCPK:TCEHY). NuBank also boasts pre-IPO backers such as Sequoia Capital and Tiger Global Management, along with affiliates of Baillie Gifford, Morgan Stanley (NYSE:MS), and SoftBank (OTCPK:SFTBY).

Tipalti quadruples its valuation 

Nu’s successful listing probably served as a sign of things to come.

Just a day later,  Israeli fintech firm Tipalti, a developer of payments and compliance solutions, has soared to a valuation of over $8 billion after a fresh $270 million investment, the company announced on Wednesday.

Tipalti, which means “I handled it” in Hebrew, raised $150 million last October giving the company a valuation of $2 billion. But this latest series F round, led by Swiss multinational G Squared, has just seen Tipalti quadruple its worth following an exceptionally strong year.

Tipalti says it processes over $30 billion in total annual payments volume, a number that’s growing 120% annually. The company was founded in 2011 by Chen Amit, who serves as CEO, offering a cloud-based platform that allows clients to handle financial tasks such as payments to suppliers (accounts payable), tax and VAT compliance, and invoice management, across borders in a range of currencies.

The company’s customer roster includes the likes of Amazon, Twitter, GoDaddy, Vimeo, and GoPro. Tipalti typically targets mid-market companies, defined as companies with revenues between $10 million and $1 billion, and which account for more than one-third of employment and about 40% of GDP, the company said in a statement Wednesday. Such companies have had to change how they manage their financial operations, with the ongoing Covid-19 pandemic making CFO jobs harder and more complex.

Green fintech

But other than the current pandemic, investors are increasingly valuing fintechs highly due thanks to the green revolution.

Back in 2019, Goldman Sachs made waves after becoming the first mainstream Wall Street bank to renounce fossil fuel investments. GS said it would cease financing any new oil exploration or drilling in the Arctic, or financing new thermal coal mines anywhere on the globe. Goldman also pledged to invest $750 billion over the next decade into areas that focus on climate transition.

Predictably, other banks began to feel the ethical squeeze and a slew of other investment banks soon followed suit.

In April 2020, Citigroup joined GS by denouncing financing thermal coal miners by 2030, while Deutsche Bank, Germany’s largest lender, vowed to cut ties with banks that continued to finance the coal industry by 2025. Meanwhile, BlackRock Inc, the world’s largest asset manager with $9.5 trillion in assets under management (AUM), pledged to grow its green portfolio more than 10-fold over the next decade from $90 billion to more than a trillion dollars.

But it’s not just mainstream investment banks that have doubled down on the $30 trillion ESG market- lately, there has been an explosion of fintech--both new and incumbent players--going green.

Good case in point is Aspiration, a California-based online bank backed by Hollywood actor Leonardo DiCaprio of the Titanic fame, that has fashioned itself as a Wells Fargo alternative, and whose proud mantra is “Clean rich is the new filthy rich.” 

Aspiration promises to take the leftover change from customers’ purchases and use it to plant millions of trees around the world.

Aspiration says it can justify the “green” mantle because it has planted 35 million trees over the past 12 months alone. Indeed, CEO and co-founder Andrei Cherny claims his company now plants “as many trees every day as there are in Central Park.’’

The company also touts its mutual fund, which it says is “free” of fossil fuels. 

According to Lexology, the term ‘Fintech’ generally describes technologies that strive to improve and automate the delivery and use of financial services to clients. The concept of ‘Green Fintech’, is, however, relatively new and it typically describes companies or initiatives which have a positive impact on the environment, e.g. resulting in lower greenhouse gas emissions or greater biodiversity.

The ‘Green Fintech’ ecosystem encompasses fintech companies that are actively shaping this fundamental shift to sustainability from planting trees to offering fossil-fuel-free investment options. 

Aspiration is, however, hardly the only fintech that can lay claim to the green mantle.

In August, Ant Forest, a tree-planting mini program in the Alipay app that enables users to earn virtual points for making low-carbon lifestyle choices, announced that it has helped over 600 million users plant more than 326 million trees since it launched in 2016, contributing to reforestation efforts in some of China’s most arid regions.

Finovate lists 25 fintech companies that have gone green.

 

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