Revolut’s valuation issues herald a stormy horizon for less profitable neobanks

The Stock Exchange goes on a hunt to understand what a key group of fintech startups is worth or not

While the bank With the world watching US lender First Republic convulse publicly after its earnings report detailed a widespread evaporation of its deposit base, the neobank startup world is also taking a beating.

Earlier this week, Revolut, a popular UK neobank, saw its valuation drop by around 46% in the eyes of one of its backers.

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Considering Revolut last raised $800m at a $33bn valuation in mid-2021, it stands to reason it was likely overvalued at the time – show us a startup cycle nine figures from that time that fits perfectly with today’s rating marks and we’ll buy you a smoothie.

But Revolut, getting such a drop in valuation almost two years after its last valuation, made us sit up and take notice.

There was a time when the neobank-for-x-market was one of the most popular starter models, after all. Mountains of capital have been poured into dozens of global startups seeking to reinvent or at least revamp consumer and SME banking. It even led to some liquidity, including Nubank’s massive IPO and its resulting 11-figure valuation.

Revolut’s revaluation raises some questions: how much cuts are there left to make in the world of fintech? And, are we likely to see something similar more generally in the neo-banking startup sector?

This morning, we analyze what happened in the company in the first quarter of 2023 along with a handful of data points from F-Prime’s fintech index and resulting reports. Next, we’ll cover the most recent financial results of the neobanks we have available and come to a conclusion about how much pain – or how little – neobanks can expect in the coming months. To work!

Money in, money out

We have fintech funding data from CB Insights for Q1 2023, but it comes with a huge asterisk. Without additional context, funding for fintech startups is up 55% from Q4 2022, representing a global tally of $15 billion.

The caveat, however, is that Stripe’s latest $6.5 billion raise alone was more than a third of that. If you exclude that cycle, the tally comes down to $8.5 billion, down 12% quarter-over-quarter.

That’s the big picture. Taking a closer look at the fintech cohort, we’re curious which categories outperformed the others. Data of this kind on private companies is difficult to obtain, but we have interesting information on public companies.