?? Worried about the 'winter is coming'?

Greetings, Crunchers!

The Couchonomics Crunch is back with a new look and feel.

It hasn’t been a good year for the market… and I bet a number of you are pulling your hair right now over the current downturn in valuations.

TODAY'S MARKET MOVES

SOME FAMILIAR FINTECH STOCKS

Note: The variance captures DoD movement in the price

WHAT’S NEW IN FINTECH?

• Apple is also delving into one of the hottest areas of consumer finance – BNPL. But instead of pulling out your credit card, iPhone users will simply be “tapping to pay.” Its BNPL service is part of an initiative to become a full-scale digital wallet or “super app” for payments.
• What are the biggest fintech companies in the USA this year? Although the fintech industry has been on a hell of a ride since the start of the pandemic, these top 10 fintech companies remain to stand the test of time… or at least for 2022.
• Citigroup has ambitious plans for the future to hire 4,000 tech staff to tap into the global “digital explosion" in an effort to better serve their customers and employees.

HERE’S YOUR 3-STEP PLAN FROM a16Z TO NAVIGATE THE CURRENT CHALLENGING STATE OF THE MARKET

Through market uncertainty and downturns, it’s important to remember that markets are cyclical and downturns come with a silver lining. Some of the strongest businesses are forged in the toughest times, and often, those that survive when the market turns are rewarded with increased market share and leaner, more efficient operations.

You all would have probably read the usual advice to - conserve cash, extend your runway, and shift your focus from growth to efficiency. Here are 3 steps that you can go through in tough times like the ones we are experiencing:

1. Reevaluate your valuation:

Start with quantifying how valuation multiples have changed (your valuation multiple is the ratio of your valuation to revenue). Here, public markets provide the best basis for recalibrating private growth valuations because public markets tend to see the effects of decreased valuations first.?Downturns hit different sectors differently, making it important to look at relevant public companies to best gauge where you stand. You can get a rough estimate for the change in your valuation by looking at leading public companies in your sector.

Once you have an idea of how much your market segment has dipped, how do you recalibrate your goals for this new lower valuation environment?

A helpful exercise is to figure out what ARR you need to reach to get back to your last round’s valuation and plan accordingly. To do this, use the estimated change in valuation multiples from leading public companies in your space and add a growth- and efficiency-adjusted premium for your faster growth. Then use this number to calculate the ARR you need to get to. Your goal should be to hit this revenue target with at least 12 months of runway. If you can do this, you’ll be in a strong position to raise your next round of funding. Raising capital with less than 12 months of runway sends a negative signal to the market and makes it harder to have a good fundraise.??

2. Control Your Burn [Multiples]:

Now that you have a target ARR, how do you evaluate if your business is growing efficiently to reach it? Here you shift your focus to?burn multiples, which are defined as cash burned divided by net ARR added.

The burn multiple – which are define as cash burned divided by net annual recurring revenue (ARR) added – is a metric that takes into account all aspects of a business in order to provide an accurate measure of efficiency. You should build a plan to make sure your burn multiple is less than 0.5x. If your burn multiple isn’t where you need it to be, there are many ways to improve your burn multiple to grow more efficiently, including right sizing different functions,?improving margins, or lowering CAC.

3. Scenario Plans

Burn multiples and valuation multiples tell you how efficiently and how much you need to grow, respectively. However, when the fundraising environment changes and getting capital becomes more uncertain and more expensive, you also have to carefully watch your cash balance and manage your runway. Scenario planning is helpful for considering how macro events – wars, supply chain issues, inflation – could impact performance metrics, like growth and CAC.?Keeping a close eye on cash outlay and having scenario plans will enable you to quickly adjust spending and investment in response to performance.?

At a minimum, its recommend planning for the following three scenarios: Base Case, Best Case & Worse Case.

Once you have these plans, assess where you are on a quarterly or monthly cadence, and then adjust your spending and hiring accordingly. While hopefully you are headed towards the best case scenario, if you find that you are heading towards the worst case scenario, there will likely be difficult decisions to make

? QUICK INVESTMENT ROUNDS

• Acrisure, the fintech leader that operates a top-10 global insurance broker announced today it closed $725 million in Series B-2 preferred equity and received an unprecedented valuation of 23 billion dollars.
• HyperPay, a Saudi fintech, has raised $36.7 million in a funding round led by digital payment giant Mastercard, with venture capital firms Amwal Capital Partners and AB Ventures.

?? REPORT OF THE DAY

The Future of the Wallet: How AI advisors, digital IDs, and wearables are turning mobile wallets into the next super apps.

The mobile wallet industry has seen significant advances in the last decade, changing how people manage and spend their money. From Apple Pay to Google Pay and beyond, these innovative payment methods are changing the way people manage their finances as well as shop. Nowadays you may be more likely to download your wallet than pick it out at department stores! This report by CB Insights dives into the evolution of mobile wallets and where the technology is going next, from AI-based financial assistants to super wallets and beyond.

? BEFORE YOU GO…

• Web3: Mastercard wants to make buying NFTs with Mastercard cards easier and safer than it ever has been through its collaboration with Immutable X, Candy Digital, The Sandbox, Mintable, Spring, Nifty Gateway, and Moonpay. The catch? You’ve got to be a 2.9 billion cardholder.
• Augmented Reality: Amazon's shopping experience is about to get a facelift with its latest feature, Virtual Try-On for Shoes. Customers can use their cameras to visualize what shoes will look like on them.
• Crypto: American Express is partnering with crypto wealth management platform Abra to launch the Abra Crypto Card, the first-ever US crypto rewards credit card.
• Crypto: PayPal is making it easier for cryptocurrency holders to transfer their digital assets off of the platform.

?? THE LATEST ON COUCHONOMICS

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Till the next time, crunchers. Have a good day.

Thanks.

-- Arjun