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“The infrastructure has taken to a whole new level,” said CJ MacDonald, founder of Step, a debit card provider for teens. Launched in September, Step quickly reached a million customers, in part thanks to recommendations from social media influencers like Charli D’Amelio.
In December, Step raised $ 50 million in funding. The company was not looking for more money, MacDonald said. But investors started calling as soon as the app joined the list of top-downloaded financial apps shortly after its release. The money came together in a matter of weeks, he said.
Investors are even asking to subscribe to broken transactions. Plaid, which agreed to sell to Visa for $ 5.6 billion last year, saw the deal collapse in January after it came under antitrust review. Now the fast-growing company is in talks with investors to raise funds worth nearly $ 15 billion, said two people with knowledge of the company who spoke on the condition of not being identified as the talks are ongoing. confidential. The Information earlier reported on Plaid’s funding negotiations.
Sheel Mohnot, an investor at Better Tomorrow Ventures, said Plaid’s selling price to Visa was considered “so unbelievable” at the time. But now, with many fintech companies approaching $ 100 billion in valuation, that looks weak.
Some warn that the excitement has taken a step ahead of reality.
Robert Le, analyst at PitchBook, pointed to the valuation of Affirm, which has a market capitalization of $ 20 billion, or about 40 times its annual revenue. That’s much higher than the value investors typically place on blue-chip financial services companies. American Express, for example, trades at just three times its annual turnover.
“I think it’s a little irrational,” Le said. “In the long run, some of these companies will have to pull out.”
Some start-ups have already experienced growth difficulties. Chime, a banking start-up, experienced a series of outages in 2019, leaving millions of customers without access to their money for hours. Some Coinbase customers have reported being banned from their accounts or having their money stolen. And Robinhood faces nearly 50 lawsuits and multiple regulatory inquiries after halting trading in some stocks during a “meme” stock frenzy in January.
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