Here are the fintech unicorns that just got cut

Welcome back to The exchange, where we take a look at the hottest fintech news of the past week. If you want to get The Interchange straight to your inbox every Sunday, head over here to sign! We look at a bunch of news — from new unicorns, to a fintech doing well, to one that shut down, to another that made layoffs. Here you go!

The first unicorn in 2024 is likely to be fintech

It’s a bold statement, I know. Reaching the $1 billion valuation milestone—aka the unicorn—is what startups live for. The number of companies able to claim this title peaked in 2021 and slowed from the second quarter of 2022, according to a chart created by colleagues Anna Heim, Alex Wilhelm and Miranda Halpern.

It wasn’t much fun for already-clipped unicorns either, as both Mary Ann and Rebecca Szkutak reported in December 2022. Valuations for companies like Stripe, Brex, Chime, and Plaid were all sheared in the last half of 2022. Others, like Chipper Cash, made layoffs.

It was so bad that we watched as many of them as we could to see who was filming it and how. For example, Klarna, here and here. And in October, we saw Indian fintech Slice merge with North East Small Finance Bank.

However, there is more good news. While only 86 unicorns have been cut in 2023 so far, new research from Crunchbase shows that financial services companies dominated those that reached $1 billion in valuation in November — a third of all new unicorns minted last month. Most other sectors had one company.

Crunchbase’s Gene Teare reported that three fintech companies — buy now, pay later Tabby app. business discount management company Enable. and lending platform inCred — joined the ranks of the unicorn.

Why are some fintechs doing so well? Various reasons:

All in all, we’re watching 2024 to see who takes the horn. If what we just presented is any indication, it will likely be a fintech company.

— Christine

Fintech for good

Proptech has had a tough year, with high mortgage rates making it difficult for many companies in the space to make money and, in some cases, even survive. So when I got a pitch for a proptech company in the space that recently raised $22 million, I was intrigued. I was even more interested when I realized their mission.

So many real estate tech companies we hear from are focused on the mid and high end of the market. And that’s okay. But it’s very rare that we hear from companies that actively focus on lower-income families.

Enter Simple Houses. The Portland, Maine-based startup is going to tackle the affordable housing crisis by buying single-family homes in blighted neighborhoods, renovating them, and then renting them to very low-income families, seniors, and people with disabilities (or Holders of Section 8 Vouchers).

The opportunity to help people overcome poverty and improve their chances for social and economic mobility is what attracted Brian Bagdasarian and co-founder and CFO Robert Kavanagh to create the Simply Homes model.

Founded in 2020, Simply Homes spent its first two years developing its platform and related models before purchasing its first home in January this year. By the end of this month, the startup is expected to have 108 units, or houses, in its portfolio. Since its launch in the first quarter, its revenue has grown by more than 50% quarter on quarter.

Over 80% of Simply Homes’ tenant base are single parents who would need to work around 150 hours a week to afford the rent of a market-rate home.

I love the idea of people in that income bracket having more options for housing, and that’s when fintech really excites me. Doing good while earning money? The ideal definition of win-win. Read more.

– Anna Maria

Weekly News

Mary Ann wrote about how Navan, an expense management startup once known as TripActions, has laid off 5% of its staff, or 145 people. The company said the move was aimed at helping it move faster towards profitability. Navan confidentially filed to go public this year in late 2022, but never took the plunge. Reports peg an IPO for April 2024. Navan was once strictly focused on managing travel expenses, but upped its overall expense management game at the start of the COVID-19 pandemic, when its revenue literally went to zero. It now competes with Brex and Ramp. Read more.

Journalist Manish Singh brings us some stories from India. The first is that a decision by Paytm offering fewer low-value personal loans sent the financial services company’s shares tumbling 20% on Dec. 7. During an analyst call this week, Paytm attributed the move to “recent macroeconomic developments and regulatory guidance” as well as dialogue with lenders. Read more. The second story is about the buy now pay later startup ZestMoney closes until the end of December. The company, backed by investors such as Goldman Sachs, was once valued at $445 million. Manish writes that the decision follows leadership’s effort to find a buyer for the company a year after its founders stepped down in May. Read more.

Editor-in-Chief Sarah Perez writes that X is moving forward with plans for a payments system that it first reported in November 2022. At the time, X owner Elon Musk suggested that users would be able to send money to others through the platform, withdraw money to certified bankers accounts and have access to a high yield money market account. This week, X obtained additional money transmitter licenses in three US states to enable it to carry out money transfer operations. Read more.

At TechCrunch+, editor-in-chief Alex Wilhelm compares the rush to fund AI startups to the one that will inject millions of dollars into fintech startups in 2021. Specifically, during that time, one in five venture dollars went to fintech . Alex writes, “A bunch of fintech companies that were valued similarly to SaaS companies in 2021 ended up being worth a lot less. Today, funding is tight, the exit market has frozen, and fintech is now boarding the race bus instead of skating toward a hot horizon. Will AI see similar fortunes boom and bust?” Read more.

Speaking of artificial intelligence, reporter Aisha Malik reports MasterCardher new tool called Shopping Muse. It’s an AI shopping assistant that searches for clothes and accessories based on simple prompts like “What should I wear to a summer wedding?” It will then make personalized recommendations. Not sure what you’re looking for? That’s okay — Aisha says Shopping Muse can recommend items using image recognition and can allow retailers to do the same. Read more.

Aisha also reports Amazonplans to exit the PayPal-owned mobile payment service Venmo as a next month payment option. The official announcement came as Amazon alerted users last week via email that Venmo will no longer be accepted on Amazon.com starting January 10, 2024. However, Amazon will still accept Venmo debit and credit cards. More here. Also, read how PayPal shares it slipped in the news.

Natasha Lomas reports from Europe how credit rating agencies operating in the European Union could face tighter restrictions under the bloc’s privacy laws following a ruling by the Court of Justice of the European Communities (CJEU) on 7 December. The referral concerned complaints against the practices of a German credit rating agency, called Sufa, but could have wider implications for credit reporting agencies operating in the General Data Protection Regulation (GDPR) area. Read more.

Other items we read:

$12B HR Startup Deel Has Changed Recruiting Globally — Now It’s Looking To Change Regulators’ Minds

AI helps new parents apply for paid leave

Robinhood CEO ‘eager’ to lead 24/7 trading charge

Index partner Mark Goldberg is leaving to launch the fund

Online brokerage Public allows individual investors to buy pieces of corporate bonds

They come together:

Adyen will act as global acquiring bank for Klarna

Warren Buffett-backed Nubank partners with Circle and Talos to increase access to crypto in Brazil

Mastercard and Brim Financial partner in credit card infrastructure

Extend and Concur Invoice join for cutting-edge virtual card payments

The Treasury Prime & Effectivev team to detect fraud in businesses and banks