SoftBank is an elephant that keeps falling over ??; Strong dollar poses threats for European (Fin)Techs ???? & 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. Credit Suss, or Lehman Brothers 2.0: a new crash coming? ???[deep & solid analysis]
2. Adyen + Tink, or why the future of payments is open ???[& why Open Banking is the Next BIG Thing in FinTech since plastic]
3. The most fascinating charts about BNPL you've probably never seen ???[if you’re in BNPL, FinTech, Credit, Lending, etc., this is a goldmine!]
4. 4 Bitcoin charts that will surprise you ???[I promise!]
5. Your FinTech should be much more like Liquid Death, the $700M canned water brand ??
6. The Big VC Pullback everyone was expecting is here and it's bad for startups ???[it’s bad news for startups]
7. Lessons from another failed neobank ??
8. Crypto is here to stay. And it's time to talk about MENA ???[if you’re in crypto, you cannot ignore this!]
9. Perfect timing: Mastercard launches crypto anti-fraud tool ?
10. Has crypto died in India? ???[data is both promising & not]

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

Last week (3-7 October) was one of the most important weeks in FinTech this year so far.?We will look at SoftBank that's an elephant that keeps falling over (& what this means for the future of FinTech); the strong dollar, which poses threats for European (Fin)Techs (& its threats and opportunities), 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.

SoftBank is an elephant that keeps falling over ??

An edited version of one of SoftBank’s iconic presentations.

The (bad) news ???The Vision Fund, a venture capital arm of the investing giant?SoftBank, is planning to cut at least 30% of its workforce globally, or circa 150 of the 500 employees, according to a report by Bloomberg.

The news comes nearly two months after I converted SoftBank’s plans to review the organization’s size and structure which involved some potential cost-cutting.

More on this ???It seems that SoftBank is an elephant that’s trapped in a deep valley, and there are simply not enough unicorns to carry it out:

• We can remember that SoftBank recently reported its largest quarterly loss ever.?Its tech-centric Vision Fund lost a whopping $23 billion in Q2 as tech investments turned sour. This follows a loss of $26 billion the previous quarter, which means that the company lost a whopping ~$50 billion this year so far. All their gains since 2017 have now been wiped out.?Ouch???
• SoftBank was heavily invested in?DoorDash, WeWork,?Uber, etc., and almost all these investments didn’t pay off.
• It recently cut the valuation of its portfolio company Oyo to $2.7B (from $10B). The India-based hotel chain startup is months away from its IPO. Another major readjustment came from Klarna - although it raised $800M in new financing in July at a $6.7B valuation, it went massively down from the $45.6B valuation that SoftBank assigned the company a year ago.
• Also, losses were spread?across SoftBank’s portfolio of 400+ companies, including,?DiDi?(the Uber of China), and SEA?super app?Grab, among others. The firm has marked down 284 of its portfolios in the latest quarter, including listed corporations and still-private startups.

Why is this important? ???Massive and growing losses, and now brutal layoffs go on to show again that we’re in a completely different market cycle right now. Just recently, Softbank was one of Europe’s most prolific FinTech investors. Today, it’s an elephant that keeps falling over and indicates that the future of FinTech investments will be totally different. Here’s more on that + the takeaway:

?? THE TAKEAWAY

The future outlook isn’t promising? ???SoftBank is probably the largest example of companies struggling with the economic downturn after flourishing in 2021. More importantly, given how widespread its tentacles are, it’s a good illustration of the market itself. The market cycle has changed and it took SoftBank with it. Cutting the workforce by as much as 30% is yet another proof that SoftBank is massively trimming back on its investments. For context, we can remember that?The Vision Fund approved just $600M in investments from April to June, down from a record $20.6B a year earlier. That’s a massive drop in $$$ employed. Hence, it’s more than clear now that we will probably don’t see any big Fin(Tech) backings from Softbank anytime soon. And the future of FinTech investments will be totally different - more selective, driven by fundamentals and not hype or FOMO, and probably with SoftBank watching from the sidelines. The days of crazy FinTech valuations are probably over. For now.

Strong dollar poses threats for European (Fin)Techs ????

What’s happening? ???European and UK founders have a lot of things to worry about this year. In addition to the energy crisis and rising inflation, the list now includes a sinking currency - in the year to date, the pound is down nearly 15% against the dollar while the euro has lost more than 12% of its value.?Ouch! ??

As it’s visible from the below chart, such a nosedive hasn’t been seen in decades:

Why does this matter? ???This macroeconomic cataclysm will undoubtedly prove incredibly challenging for lots of startups. Yet, for others, there may actually be some benefits amid all the drama.

Here’s more on that + the takeaway on how the devalued GBP/EUR will affect European (Fin)Tech companies:

?? THE TAKEAWAY

Navigating threats & opportunities ???First and foremost, we have to talk about the potential takeovers. European and British companies are now vulnerable to being taken over by foreign entities (be it the US or others) taking advantage of both a weak currency and general weakness in equity markets. A case in point here is Arizona-based software giant?NortonLifeLock?that has purchased antivirus developer?Avast?last month in a deal worth $8.1B. Furthermore, a weaker euro & pound makes it harder to pay expensive talent in the US. European tech companies have historically struggled to compete with the higher salaries offered by US counterparts - a mismatch that will now be even bigger. Following a similar vein, falling behind their US peers European institutional investors might now get even more risk-averse.?This can effectively impact the ability of high-risk companies (i.e. DeepTech) to raise money. On the other hand, there are some opportunities too. Weak European currencies might make it easier for startups to raise money. This is acute for smaller (Fin)Tech companies trying to raise $$$ in the private markets, especially given US VC firms are increasingly expanding their presence in Europe. Also, if you’ve recently raised in dollars, you’re very lucky. Those startups that have secured dollar commitments through 2022 now have a great opportunity to leverage USD strength and build their GBP/EUR cash reserves, expanding their operational runway.

Extra Reads & Quick Bites for Curious Minds??

• OB’s potential ???US-Based Allied Market Research has released a new report, revealing that the Open Banking market is expected to be worth $123.7B in 2031. According to a new report published by Allied Market Research, titled, ‘Open Banking Market,’ the open banking market was valued at $13.9B in 2020, and is estimated to reach $123.7B by 2031, growing at a CAGR of 22.3% from 2022 to 2031.?Still not convinced? Read this:?Adyen + Tink, or why the future of payments is open ??
• The pivot ???Argentina's state-owned energy company has moved into crypto mining:?YPF, Argentina's state-owned energy company, is?supplying power?to an international crypto mining company with a 1-megawatt operation in southern Argentina. The company plans to launch a second project eight times larger before the end of the year. “We started to develop this generation pilot for cryptocurrency mining with a vision of sustainability and business from flare natural gas, which cannot be harnessed during exploration and at the beginning of the production of an oil field,” YPF Luz CEO Martín Mandarano said.?An indirect buy of the dip????

Money Moves??

• Tennis champions?Venus?and?Serena Williams?have invested in European social and community-based investment app? Shares ?and been appointed as the company's first brand ambassadors. Shares is a one-stop platform for any investor to make trades, better manage their portfolio, and discuss opportunities with friends and family. The company has garnered over 150,000 users and become the second most downloaded app in the ‘Finance’ category on the App Store and the sixth most downloaded app in the UK since its launch in May 2022. The Williams sisters’ interest in the company comes shortly after Shares closed on a $40M funding round led by Peter Thiel's Valar Fund.?Bonus:?The future of investing is social? Shares thinks so ??
• London headquartered?Toqio?has secured €20M for its software-as-a-service model for building embedded banking services.
• Global FinTech?Circle, the issuer of USD Coin (USDC) and Euro Coin (EUROC), has signed an acquisition deal for merchant and developer-first payments orchestration platform?Elements?for undisclosed terms.

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

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About: I am?a business developer, sales professional, and 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.

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