In the world of finance, when one item goes down, it does not necessarily mean another item goes up. In this case, however, a sharp decline in the number of technology companies going public means that more of them are seeking private funding. In fact, according to Bloomberg, FinTech funding went up in 2015.
FinTech Funding in 2015
Social Finance Inc (SoFi) set a new record with $1 billion of funding during the year, which is a good sign that FinTech overall is a good sector to bet on. Another sure sign is the fact that traditional financial institutions are placing their bets on FinTech.
Any time there is disruption, legacy institutions have a choice. They can fight it or they can join it. The music industry chose to fight it and lost. Traditional book publishers are still trying to fight the surge in independent e-book publishing. The Internet has spawned entire industries of digital businesses and it looks like it’s the finance industry’s turn to play. Goldman Sachs, Citigroup, Motif Investing, and Square Inc. are just a few of the finance companies investing in FinTech. If Wall Street goes in, it wouldn’t hurt for Main Street to at least take a look. Tomorrow’s Main Street might actually be a highway- the information superhighway.borrow
FinTech Trends: Will 2016 See a Reversal in the Public-Private Funding?
Some analysts are predicting a new trend in technology IPOs for 2016. TechCrunch goes so far as to name names. While most of the tech companies on their list don’t line up in the FinTech sector, one company that did make the list is SoFi. Job search website Glassdoor also made the list. I’d say both companies are sure guesses. A unicorn with so many great investors riding on it can’t afford to disappoint. SoFi CEO Mike Cagney has already said SoFi will go public within the next 12 months.
The big question for IPOs in 2016 is, what will happen to valuations? There were disappointments last year. LendingClub and On Deck Capital both saw their valuations drop significantly after going public. What will happen with the already profitable SoFi is early investors will likely sell at least a part of their shares to those on the public ground floor. But will that lead to any significant trends?
All prognostications aside, 2016 and beyond might very well see a few more real estate companies in the FinTech sector seeking funding. The marker is far from saturated.