Why do valuations of Fintech companies keep tripling? Our friends at AltFi ask, and partially answer, this question…
This year so far has seen some of the biggest fintech funding rounds in history, with some of the biggest names in fintech picking up billions of dollars worth of VC funding.
In the first quarter of 2021 alone, UK fintechs raised more than $2.9bn in funding, an increase of 331 per cent on the same period in the year before.
But, with these massive funding rounds also come increasingly higher valuations, more often than not fintechs see their valuations increase substantially, by up to three times in some cases.
So, why is this happening? Is it just a new trend in fintech as companies continue to get bigger and more established?
Two payment Fintechs are expected to list shares on both the NASDAQ and NYSE this week.
Flywire is expected to sell 8.7 million shares on the NASDAQ market under the ticker FLYW.
Paymentus is expected to list 10 million shares on the NYSE under the ticker PAY.
Both deals arrive at around $200 million.
Historical Performance And IFISA Process Guide
That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.