Fintech: Brex, MSFT, and Fintechs cutting headcount, but unemployment stays low
Brex has announced a 20% reduction in its workforce, MSFT fires 1,900 in gaming
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FINTECH VALUATIONS: Brex cuts 20% of its employees as fintechs trim the fat
LONG TAKE: Will $5B Trade Republic, Germany’s Robinhood, win the race for European wealth? (link here)
PODCAST CONVERSATION: Building modern digital lending across Capital One, Barclaycard, Funding Circle, and TRIVER, with TRIVER CEO Jerome Le Luel (link here)
CURATED UPDATES: Payments, Lending, Digital Investing
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Digital Investment & Banking Short Takes
FINTECH VALUATIONS: Brex cuts 20% of its employees as fintechs trim the fat
Brex provides financial services tailored to startups and small to medium-sized businesses, offering corporate credit cards with higher credit limits, expense management tools, and business banking solutions. They also offer rewards programs, cash management, and integration with various business software to streamline financial processes for businesses. This month, Brex has announced a 20% reduction in its workforce, amounting to 282 employees — seemingly a trend in high tech employment.
The move comes after significant business gains for Brex in 2023. Following the collapse of Silicon Valley Bank (SVB), Brex acquired 4,000 new customer accounts and added $3 billion in customer funds under management by August 2023. This is in large part due to the credibility damage to SVB, which witnessed the largest bank failure since the financial crisis, the companies’ overlapping product offerings, and Brex’s ability to rapidly onboard thousands of new clients. The latest valuation we have of Brex is $12.3B, following its $300MM Series D-2 fundraise at the start of 2022. Still, the company is burning hundreds of millions of dollars.
The recent layoffs at Brex, while significant, align with a broader trend of operational streamlining observed in the fintech industry. The year 2023 was a significant year for fintech layoffs — BaaS fintech Synapse laid off 40% of its staff in October, paytech GoCardless laid off 15% in June, neobank N26 laid off 4% in May, and PayPal laid off 7% of staff in February. In the broader industry, Microsoft just laid off 1,900 in their games division.
We see two main factors that have led to smaller, more agile organizations.
Fintech Funding Cuts: Funding into global fintech companies has dropped 49% year over year to $23B in the first half of 2023. Less funding means that company success is based on greater profitability through streamlined operations and an increased focus on the core, proven business model. Experimental or R&D projects that do not yet have product-market fit suffer.
High Profile Workforce Reductions: Case studies like Elon Musk’s highly publicized acquisition of Twitter and subsequent reduction in the workforce by 80% have highlighted the benefits of operating a lean tech company and brought it into vogue. There may be a cultural force at play.
We expect that the industry will stay leaner going forward, especially for companies planning to IPO (looking at you Circle) and have to please public investors. Fintech competitors are becoming a commodity, and commodities have to stay lean, optimize in their vertical, and achieve profitability. While it may be bad news for employees and job searchers, this is the necessary recalibration for the industry.
What’s strange, however, is that the general unemployment rate seems to be holding steady at below 4% — historically on par with levels prior to Covid. However, the high tech industry is seeing continued cuts of a large magnitude. That suggests to us that the capital markets hypothesis is correct — this is a luxury funding problem.
👑Related Coverage👑
Blueprint Deep Dive
Long Take: Will $5B Trade Republic, Germany’s Robinhood, win the race for European wealth? (link here)
The battle for European wealth is heating up. Just last month, Trade Republic, Europe’s largest pure-play neobroker valued at $5B, announced profitability and a freshly obtained EU banking license.
At the same time, Robinhood announced plans to launch in the UK and Munich-based Scalable Capital announced a new fundraise at a stable $1.4B. This week we dive into the rise of the neobroker model with a focus on Trade Republic, analyzing its performance among competitors, and whether it can win the race against $10B behemoth Robinhood.
🎙️ Podcast Conversation: Building modern digital lending across Capital One, Barclaycard, Funding Circle, and TRIVER, with TRIVER CEO Jerome Le Luel (link here)
In this conversation, we chat with Jerome Le Luel - Founder and CEO of TRIVER - a London-based startup that uses open banking data and AI to provide short-term working capital to SMEs. Jerome has 25+ years experience of deploying advanced credit analytics at world-class lenders.
Jerome’s previous role was as Chief Risk Officer of Funding Circle, where he built the automated platform that enabled $12Bn of loans to small businesses. Additionally, his previous role at Barclays, Jerome was in charge of stress testing, risk reporting and quantitative analytics for the entire bank.
With a 35% open rate and 1 million post views per month, we have an engaged audience of Fintech, DeFi, and AI enthusiasts receptive to your messaging.
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Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
⭐ General Catalyst leads $200M investment into Bilt Rewards, doubling its valuation to $3.1B - TechCrunch
DailyPay secures $175m in latest funding round, valuation soars - Fintech Global
Klarna introduces $7.99 ‘Klarna Plus’ subscription plan as it approaches an IPO - TechCrunch
Revolut unveils Mobile Wallets for cross-border payments - Finextra
Venmo, Zelle and Cash App leave users vulnerable to fraud - Manhattan DA - Finextra
Neobanks
Financial Operations
⭐ ModernFi lands $18.7m Series A funding to boost deposit network expansion - Fintech Futures
Digital Onboarding grabs $58M to help banks with profitable customer engagement - TechCrunch
Digital Investing
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