E-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt ????; Curious case of Elliott Mgmt, PayPal & Pinterest ?? & More!

???Hey,?Linas here!?Welcome to a????weekly free edition????of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.

If you’re not a subscriber, here’s what you missed this week:

1. The future of neobanks: some will swim while others will sink. Here’s how to survive the wave ??
2. Brutal Robinhood layoffs & yet another red flag for stock trading FinTechs ??
3. Bank earnings: common global trends & uncertain future ??
4. JPMorgan is building a travel agency ??
5. Mastercard’s earnings as a reflection of the economy & 3 growth trends ??
6. Meta, what’s the Meta with you? ??
7. Massive payments consolidation continues as Global Payments buys EVO for $4B ??
8. Strong results from PayPal: massive BNPL growth & positive future outlook ??
9. Female-founded FinTechs are struggling… ??

and more! Don't miss out and join the community here????

Last week (1-5 August) was a super compelling and hot week in #FinTech.?We will look at E-commerce, which isn’t what it used to be, so FinTechs & tech startups will have to adapt; explore the curious case of Elliott Investment Management L.P. , PayPal & Pinterest ; see that despite VC funding slowing down, firms keep raising massive funds, and other interesting news and developments.

Without further ado, let us dive into what happened in the financial #technology sector last week. Let’s connect the dots.

E-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt ????

Spotting the trends ???One of the craziest news last week was?Shopify’s?massive layoffs - because of unsuccessful bets & a difficult macro environment the Canadian e-commerce heavyweight had to say goodbye to 10% of its workforce, or nearly 1,000 employees.

Already then I said that?this news gives us some hints for the future of FinTech (Shopify is a FinTech too) and digital businesses per se. Today, we can start spotting more trends that further strengthen the earlier guidance and provide us with a clearer picture of what we can expect in the future.

More on this ???Here are the things you can’t ignore:

• Let’s start with Shopify. In addition to the massive layoffs, the stock market poster child for the e-commerce boom of 2020 and 2021 had also posted a quarterly loss and downwardly revised forecasts. Also,?Shopify shares are down about 80% from highs last fall, which only symbolizes the broader sector woes.
• Shopify is obviously not an outlier - others in the e-commerce software space, including relatively recent market entrants like?BigCommerce?and?Global-e, are also down sharply. Even internet development heavyweight Wix?has lost more than 80% of its value past year.
• But not only startups are suffering. The shares of retail giant?Walmart?(that has a sizable footprint in US e-commerce spare too) also tanked after the firm said it has to cut prices to reduce merchandise levels, which brings profits down. This is primarily happening because of inflation running at multidecade highs, hence, budget-strapped consumers are cutting back on discretionary spending.?
• Finally, the situation for retail-focused SaaS startups and investors isn’t very convenient too. Last year, investment in e-commerce software companies hit an all-time high, with more than $4.8B in global venture funding, as per Crunchbase data. This year started hot as well, with a decline in funding in the past couple of months only slightly offsetting a rollicking first quarter. Zooming out and looking at investments in the e-commerce space for the past 5+ years, we might say that it probably peaked last year (though we still have some time in 2022):

So what does this tell us? ???It’s clear that e-commerce isn’t what it used to be, so FinTechs & tech startups will have to adapt. Here’s the takeaway:

?? THE TAKEAWAY

So what’s next? ???First and foremost, let’s agree that the market conditions right now are sharply different than they were even a couple of quarters ago. Further, the swell in online shopping that began in the early days of the pandemic has since receded.?Like Shopify, many e-commerce businesses, FinTechs, and other SaaS startups believed that the e-commerce space would permanently leap ahead by 5 or even 10 years. It didn't, of course. What is happening now is the reversal to roughly where pre-pandemic data would have suggested it should be at this point. This means that e-commerce software startups (VC-backed or not), e-commerce-related FinTechs, and other tech startups are likely to expect a similar trajectory. Consumers haven’t abandoned their online shopping carts and steady growth ahead is still expected, but it’s clear that the environment is now one in which supercharged growth will likely be much harder and costlier to achieve. Finally, this also means that you have to be more realistic with your growth projections, focus on profitability and rethink your omnichannel strategy (or pivot to one if you haven’t yet). Recession and/or fears of it, uncertain global macro environment, and overall instability can also shake up the transition to and growth of social commerce (hence impacting everyone relating to it).

The curious case of Elliott Management, PayPal & Pinterest ??

The news ???Activist investor?Elliott Management?has reportedly taken an undisclosed stake in?PayPal, the WSJ reported.

The report sent shares of PayPal as much as 10% higher in extended trading, slightly improving the 75% slump that shares of the California-based FinTech have suffered over the past year.

What is it? ???Elliott managed over $51 billion in assets as of the end of last year and has been one of the more prolific activist investors, including campaigns at big names like AT&T, Twitter, and most recently Pinterest.

?? THE TAKEAWAY

The curious case… ???PayPal was first - Pinterest could be next. In short, what might be happening here is that Elliott Management could be pushing with positions in both Pinterest and PayPal as a way to get both teams to the table and start to get a deal talk together. Remember that late last year there were rumors that PayPal was thinking of buying Pinterest. Back then, I said that it makes quite some sense as it would further solidify their Super App ambitions. Maybe that wasn’t such a bad idea after all?

Despite VC funding slowing down, firms keep raising massive funds ??

Following the money again ???While VCs might be pulling back on funding startups, they aren’t scaling back on raising more dry powder. At least for now.

More on this ???Just in recent weeks alone, several firms have announced monster new commitments to funds. Here are some of them:

• On July 12, Menlo Park, California-based Lightspeed Venture Partners raised more than $7B for four funds to invest in early- and growth-stage companies.
• Two days later, Boston-based Battery Ventures locked up $3.8B across two funds.
• Others, such as CIBC Innovation Banking, Drive Capital, Telegraph Hill Partners, Crossplane Capital, and Resolute Capital Partners, all have announced funds in recent weeks ranging from several hundreds of millions of dollars to more than a billion.

So what’s happening??Here’s the takeaway:

?? THE TAKEAWAY

Making sense of the money moves ???First, let’s zoom out a bit. Already this year, firms have publicly announced nearly $144B in funds being raised, as per Crunchbase data. That nearly matches the almost $149B announced for all of last year.?That’s massive!?But what does it mean? In short, it doesn’t really mean anything right now. We must note that some of the fundraising being announced now actually started in 2021, which was way before the market started to tail off late last year and well before Russia’s invasion of Ukraine sent it off a cliff. Hence, raising funds can be a lagging indicator of the market, as well as the fact venture has proven to be a strong driver of return in the past decades. Having said that, we should expect a different story in the second half of 2022. On the other hand, VC has been a good place to put money in the last 10 years, hence, having enough dry powder today means much more opportunities and power tomorrow given the valuations have dried up and many (good) companies are starting to struggle.

Extra Reads & Quick Bites for Curious Minds??

• More neobanking M&As ???Just last week I wrote about the beginning of neobanking consolidation when?French Qonto scooped German Penta. Now, another German challenger is being acquired. Denmark-based?Ageras Group?has announced taking over the Germany-based FinTech?Kontist. The two companies did not provide any information about the purchase price. The Ageras Group has been active in the German market since 2017. The company provides a marketplace for accounting services and has been offering invoicing software for the self-employed with Zervant since 2021. Ageras is pursuing a buy-and-build strategy to build a finance ecosystem around accounting, banking, and admin features for small businesses in Europe and the US. Kontist is a bank for the self-employed and offers banking, accounting, and tax solutions. The Kontist brand will be retained and the current management will also remain on board.?More to come???
• Revenue-based financing is struggling? ???A couple of months ago Clearco, the Canadian HQ’d and best-funded revenue-based financing startup active in Europe, had made 10% of its staff in its?Dublin office redundant. Now that number has grown to 25% of its global staff — 125 employees — its cofounders announced?on LinkedIn. It joins revenue-based financing rival Uncapped, which laid off an equal proportion of its employees in April.

Money Moves??

• Of its recently announced $7B fund,?Lightspeed Venture Partners’?commitment to seed through Series B funding rounds has more than doubled from previous years to $2B. This yet again highlights the trend of firms devoting more investment to early-stage startups.
• Chiliz, the owner of blockchain-based fan rewards platform?Socios.com, has?invested $100M?in FC Barcelona's NFTs and metaverse efforts.
• Paystand, a US-based blockchain-enabled B2B payments company, has acquired?Yaydoo, a Mexico-based accounts payable startup, to improve its business-to-business payment capabilities.?

Continue reading by subscribing to?Linas's Newsletter.?You will receive fresh news about FinTech with hot takeaways every day.

P.S.?You might enjoy my earlier pieces as well:

?? Bitcoin in 2021: a story in 5 graphs, and what might come in 2022

???A Wise pitch deck that led to London’s biggest and most successful direct listing ever

***

About: I am?a business developer, sales professional, FinTech strategist, as well as Cryptocurrency and Blockchain enthusiast. I'm highly passionate about Financial Technology and Digital Innovation, and strongly believe that it will change the world for the better. Apart from my daily job at a global payments startup where I'm leading the company's expansion into Europe, I'm an active member of the FinTech community and a TechFin evangelist.

If you've enjoyed this piece, don't hesitate to press like, comment on what you think, and share the article with others. Let's spread the knowledge together!

For more, hit the?subscribe?button, and follow me on?LinkedIn?&?Twitter. I'm building the best community the social world has ever seen!????