The Money2020 show is happening this week in Las Vegas. I was there last year and it was huge. It’s even bigger this year with over 10,000 attendees. In much the same way as this event has huge scale, fintech companies must also achieve massive scale in order to be successful. It’s a go big or go home market.
The most obvious examples of this are the payments companies. Payments is a great business in the sense that once you’re in place, you just take a small cut on everything that passes over your rails. BUT, it requires huge scale in order to make money. Square is evidence of this. It had a loss of over $50M last quarter alone, despite having revenue of over $330M.
If we stay on payments for a moment, Stripe is the favourite payments engine of every developer I know. They have raised $ 290M to date and are worth $5B. I have not seen their financials, but in 3 years they have gone from a valuation of $18M on their seed round to $ 4.9B on their series D. Clearly the market expects Stripe to be the next Paypal – a massive market leader in payments.
Direct to consumer startups also require huge capital. The consumer market is massive, but hard to reach at scale unless you have a viral product. So, if you’re looking to build a B2C market leader then you will need lots of capital to build your brand. Toronto’s Wealthsimple knows this and came out of the gate swinging with a $30M Series A round. This is massive for any market, but probably the largest Series A for an internet company in Canada. Read More