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Brazilian payments platform Ebanx became the latest fintech company to delay or cancel IPO plans due to recent market volatility, per Bloomberg on Friday. And it's unlikely to be the last.

Why it matters: The gap between private valuations and those on the public markets continues to widen, which is causing many fintechs to eschew going public — at least for now.

Context: Ebanx filed confidentially for a U.S. initial public offering last October, with the expectation that it would list in the first half of this year. At the time, it was seeking a valuation of more than $10 billion.

Public markets have not been kind to fintech startups listed in the past 12 months. According to Renaissance Capital, fintechs in mid-January were down an average of 35.4% since their first-day closing price, compared to 27.4% for the total 2021 IPO class.

Meanwhile, the overall stock market has declined in the early part of this year, as the S&P 500 was down 5.3% in January and the Nasdaq Composite Index fell 9%.

The big picture: The IPO window appears to have closed for fintech companies. But that might be OK, because valuations among private investors remain sky-high.

Already, fintech startups like Acorns and Apex Clearing have canceled their plans to go public in the past few months. When Acorns shut down its SPAC plans, its CEO acknowledged it could probably raise additional funds from private investors at a higher valuation.

And some companies are considering the possibility of never going public. After raising $400 million at a $32 billion valuation, FTX founder Sam Bankman-Fried told Lucinda last week he could see his company staying private forever.

Yes, but: While the idea of staying private longer might appeal to some venture-backed startups, investors eventually will want some sort of return for their shares.

1 big thing: Ebanx says no to IPO

Illustration of a framed downward trending stock line 

Ethereum scaling startup Polygon raised $450 million in new funding led by Sequoia Capital at a $13 billion valuation.

Why it matters: Ethereum has the largest developer ecosystem, but that popularity comes with a literal cost. Its network has been plagued by slow transaction times and high gas fees for those building on it — giving room for younger competitors like Solana to grow. 

Polygon is a so-called "Layer 2" scaling solution, which helps take transactions off-chain and more efficiently batch-processes them.

This can result in a dramatic increase over the 15 transactions per second Ethereum’s network can currently handle. To date, Polygon says it has completed over a billion transactions and has around 2.7 million monthly active users.

The valuation makes Polygon one of only a few India-based crypto unicorns — and perhaps the only decacorn. It also adds to Sequoia's growing stable of crypto investments.

The firm hasn't been as aggressive, as say, Andreessen Horowitz in betting on web3, but Sequoia is catching up quickly with big bets on companies like FTX and  Fireblocks. 

2. The BFD: Polygon lands $450M from Sequoia

Illustration of a pixelated coin hovering above a pedestal.

Railsbank, a London-based fintech that allows companies to embed BNPL and payments into their own services, plans to raise $100 million at a $1 billion valuation, per Sky News on Friday.

Why it matters: Bolstered by friendly regulation and a pool of financial talent, the U.K. fintech scene has boomed, with investments in the space surging 617% last year to over $37.3 billion, per a report from KPMG. That figure includes VC, PE, and M&A funding.

Railsbank's name may sound familiar for other reasons, too: Backed by MiddleGames Ventures, Ventura Capital and other investors, the company acquired certain assets of Wirecard — a beleaguered German payments company that spun into insolvency after a $2.1 billion accounting scandal in 2020.

And while Railsbank CEO Nigel Verdon at the time dubbed Wirecard the industry's "Enron" moment, he believed its tech and talent were real enough to help expand his company through the U.K. and Europe.

Bottom line: The U.S. may get a lot of attention for its fintech companies, but the U.K. is growing fast — with many startups still coming to battle it out in the U.S.

3. Railsbank reaches for $1B valuation

Illustration of a steaming tea kettle with the U.K. flag on the side.

A new crypto quant hedge fund (The Block) 

Jim Greco, Jason Bell, and Allan Erskine — former traders from Steve Cohen-backed market maker Radkl — have left to launch a digital-asset-focused hedge fund dubbed F9 Research.

Nike sues StockX over its NFTs (Coindesk)

Nike sued sneaker reseller StockX, accusing it of selling unauthorized digital images of shoes as NFTs. StockX sold each NFT in association with a shoe purchased via its platform, but in some cases, the NFTs sold at higher prices than the underlying physical assets.

Crypto companies spend big on sports sponsorships (WSJ)

Coinbase, FTX, Crypto.com, and Bitbuy are all said to be spending heavily to run ads during next Sunday's Super Bowl. Sponsorship consulting firm IEG expects spending on sports-related advertising by crypto companies to total over $160 million this year.

Advocates call for crackdown on fintech rent-a-bank schemes (Bloomberg)

The National Community Reinvestment Coalition, Consumer Reports, the NAACP,  the Center for Responsible Lending and others are calling for U.S. regulators to crack down on banks that work with fintechs on loans that have illegally high interest rates. 

4. Credit score

Illustration of a Scrabble board with letter tiles spelling "credit."

• Aleo, a blockchain project focused on privacy, raised $200m in Series B funding. SoftBank Vision Fund 2 and Kora Management co-led the round, with Tiger Global, Andreessen Horowitz, Samsung Ventures, Slow Ventures, and Sea Capital also participating. http://axios.link/pXPC 

• Qredo, a crypto infrastructure developer, secured $80m in Series A funding at a $460m valuation. Hedge fund veteran Dan Tapiero’s 10T Holdings led, with participation from Coinbase Ventures, Avalanche, Terra, Kingsway Capital, HOF Capital, Raptor Group, and GoldenTree Asset Management. http://axios.link/7YuU

• OwnHome, an Australian BNPL-style homeowners fintech, raised A$31m ($22m) in a Series A funding. Square Peg led. http://axios.link/wHPB

• TaxFyle, a Miami-based tax filing company, raised $20m in Series B funding. Fuel Venture Capital and IDC Ventures led the round. www.taxfyle.com

• IndyKite, a SF-based maker of decentralized identity software, raised $8m in funding. Molten Ventures led the round and were joined by Alliance Ventures, SpeedInvest and others. http://axios.link/vq06

• Flexio, a B2B payments platform for Latin America, raised $3m in seed funding led by Costanoa Ventures. www.flexiopagos.com 

5. Deals of the day

6. Memes and mumbles

Good morning, Fintech Deals readers, and happy day 4 of the Winter Olympics.

Situational awareness: SoftBank-backed DriveWealth is acquiring Crypto-Systems. Already offering companies the ability to embed fractional stock trading into their apps, the acquisition will allow customers to also add ethereum and bitcoin trading.

Tell your fintech friends, family, crypto pals, and others about this newsletter. They can sign up here.

Editor's note: This story has been corrected to list Acorns, not Dave, as one of the fintechs that have canceled plans to go public.

February 07, 2022

1 big thing: Ebanx says no to IPO