Fintech Unicorn pain as the public/private valuation inversion comes to an end

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# 6 on our Fintech Predictions for 2016:

 The strange inversion we saw in 2015, when private companies were valued higher (on paper at least) than public companies, will end in 2016. The headlines will refer to Unicorpses.

 This is happening now. It is happening in private unless a business totally blows up like Powa and Mozido. So we don’t normally read about what is happening behind closed doors. This post aims to shine a light on what is happening, but only using data that is in the public domain; if we had any inside knowledge we would be under NDA. However there is so much data in the public domain that one can gain insight if one knows where to look and what questions to ask.

 We don’t do negative reviews on Daily Fintech. We are entrepreneurs ourselves and we respect the tough journey that other entrepreneurs are on. If we don’t rate the chances of what a venture is doing, we simply don’t write about that venture. However we also like being realistic and avoiding hype. So occasionally we like to shine a light on issues that the whole Fintech community faces.

The Fintech Unicorn List

This a list of Fintech Unicorn ventures from Business Insider dated August 2016 ranked by valuation:


China Rapid Finance

Coupa Software



Funding Circle




Avant Credit



ZhongAn Insurance





Oscar Health

Credit Karma




JD Finance


Ant Financial

Analysis using Recency & Down Amount

Private rounds are negotiated in…private. We have no inside knowledge of these negotiations and if we did have inside knowledge we would be under NDA. Two things indicate that a venture might be having trouble raising money:

Recency. If a high profile venture has neither raised money for 18 months, nor released financials to show that they are profitable, it is possible that fund raising is a challenge. The normal rule is to aim to close the next round within 12 months (and in good times you see that schedule) but have enough cash to move that to 18 months. Many entrepreneurs do get out of this hole and many investors will back them during this time; but it can be a warning sign. We see three ventures in this category:

  • Green Sky (the investor is a PE Fund and they typically like profitable companies and so Green Sky maybe growing through internal accruals).
  • One 97 (but note that their last round was $500m and that goes a long way in India).
  • Mozido. This company is clearly having deep problems.

Down Amount. The normal trajectory of a high growth company is to raise more with each round. When one sees a lower amount than the previous round it can be a warning sign. We see two ventures in this category:

  • Klarna
  • Transferwise

We used Crunchbase  for this analysis because it is open and free – so anybody can check the data (and change it if it is wrong). Our philosophy at Daily Fintech is to do original research on public domain data – no insider knowledge and no proprietary data sources.

The New Unicorn Status Club

Being valued at $1bn is soooo 2015. The new status badge is a single investment round over $1bn. In that elite club in Fintech we see:



Ant Financial (with a staggering $4.5bn Series B in April 2016).

One 97 in India comes close with a $500m round, which is huge for a country where venture capital has not historically flowed easily.

We are only tracking private companies. Public stocks are a different story; that data is visible to all. The problem for the private companies is simple – the valuation comparables are in the public market. For example, if you are a Market Place Lender, valuation comparables will include Lending Club (LC), Ondeck (ONDK) and Yirendai (YRD). If you are a Payments venture, PayPal (PYPL) and Square (SQ) will be among the comparables. You can short a public stock, which acts as a good price discovery discipline. That shorting price discovery discipline is not available in the public markets, which is why we got that strange inversion in 2015 that is unravelling in 2016.

The Asia story

Looking at the location of these Fintech Unicorns we see:

  • Europe = 4
  • Asia = 9
  • America = 13

If you look at amounts invested, Asia is far bigger and the source of capital is different (more Corporate than VC fund with LP/GP structure). But that as they say is another story.


It’s tough being in the news business. Business Insider published this list in August with Mozido as a Unicorn and in September, the news sites are writing the post mortem analysis (such as this one in Forbes). It is worth noting that two other big Fintech Unocorn flameouts – Powa and Monitize share a business model – white label payments. We have long held the view that payments is the “boulevard of broken dreams”. The Mozido story seems to confirm that.

The Mozido story also illustrates why the funding recency analysis makes sense. The last round listed on Crunchbase is October 2014, well over the 18 month bar we set.

It takes 9 months to make a baby

And it takes 10 years to make a real Unicorn. By a real Unicorn I mean with $1bn in cash from a trade sale or $1bn in the public markets after shorts have tried to bring it down.

Yes, it has occasionally been done in less than 10 years, but that is rare. VC funds need entrepreneurs to do it in less than 10 years as they need to return cash to LPs. If you start on that high trajectory path, it is hard to avoid a huge flameout if things don’t go according to plan. Two Plan B options are fraught with danger:

  • Pull back on the growth throttle and get to profitability. Your investors did not back you to do this and the deal terms may enable them to force an exit.
  • Trade Sale. Strategic buyers are making the public market comparables analysis and will apply those to the valuation.

Software is eating the world and 50% of the 7 billion people on the planet are using a mobile phone. So, super high growth is possible. Yet the ending of the public/private valuation inversion could never end without some pain.  This is a high stakes game.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.


  1. […] We first covered this subject in September 2016. The inversion is when private companies are valued higher (on paper at least) than public companies. In the past, public company valuations were higher than private company valuations of a very simple reason – liquidity. This is even enshrined into tax law; there is a liquidity discount for private companies. […]

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