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Fintech frost chills neobank fundraising

Plus: Sales fuel recovery in enterprise SaaS M&A, bright spots emerge in European VC market & more
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The Weekend Pitch
October 20, 2024
Presented by Arcesium
( Jenna O'Malley/PitchBook News)
Valuations on consumer fintechs went wild in 2021. Now that they've returned to earth, even fintechs with strong growth profiles are looking at down rounds.

Current, an Andreessen Horowitz- and Tiger Global-backed mobile bank last valued at $2.2 billion in 2021, is in preliminary discussions to raise fresh capital at a discount to its last valuation, according to multiple people familiar with the company.

Current's annualized revenue for this year is expected to exceed $150 million, according to two people familiar with the company's finances.

Current denied that it had fundraising plans as well as the estimate of its annual run rate.

The last fintech wave saw a flood of digital banking startups targeting younger, digital-native customers. These neobanks grew quickly and benefited from the cheap money era: by late 2020, Current had over 2 million active users.

But since the market reset, cash-burning fintechs are being judged far more harshly.

I'm Rosie Bradbury, and this is The Weekend Pitch. You can reach me at rosie.bradbury@pitchbook.com or on X @_RosieBradbury.

As Chime, a popular fintech app, gears up for what's expected to be one of the hottest IPOs of 2025, VC-backed digital banks, even ones with durable businesses, are finding both equity and new credit lines tougher to come by.
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Trivia
(Getty Images/Thanasis)
Boston-based Lightmatter, a chipmaker using light to make faster and more efficient semiconductors, is riding a wave of AI excitement, raising a $400 million and nearly quadrupling its valuation to $4.4 billion. It's the third large fundraise for the company in 18 months. How much capital has Lightmatter raised over the past 18 months?

A) $567 million
B) $801 million
C) $672 million
D) $709 million

Find your answer at the bottom of The Weekend Pitch!
 

VC-backed sales fuel recovery
in enterprise SaaS M&A

(TU IS/Getty Images)
Corporate M&A is unexpectedly up in the enterprise SaaS sector, especially for deals involving VC-backed companies. Some 62% of enterprise SaaS M&A dealmaking in the first half of 2024 focused on such companies, compared to a recent historical average of 38%, according to our latest Emerging Tech Research.

Across the SaaS industry, deals are recovering, despite a dip in buyouts by PE firms—AuditBoard and BioCatch being the two notable exceptions. And while valuation metrics are being left out of more deals announcements, the increasing investor confidence in the space is clear.
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Dealmaking weak, bright spots
emerge for Europe's VC market
(Getty Images)
European VC dealmaking is set for another year of decline, with deal value projected to come in 9.7% below 2023's annual total. Venture growth has been the most resilient stage, accounting for over half of Q3's top 10 deals, according to our Q3 2024 European Venture Report, sponsored by J.P. Morgan.

AI is a highlight for Europe's VC dealmaking, with total deal value pacing 24% above 2023. SaaS and life sciences are also performing well this year. Recovery is finally on the horizon for the exit markets, and higher valuations are being commanded for public listings.
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Quote/Unquote
“In essence, many LPs were forced into these funds by top-tier early-stage VCs who said: ‘Invest in both our early-stage and opportunity funds, or we’ll reduce your allocation in the high-performing early-stage fund.’ Now, LPs are the ones cutting back.”

—Steve Brotman, founder and managing partner of Alpha Partners, talking to PitchBook about dwindling investment in opportunity funds.
 

Stay tuned
Keep an eye out for these insights and research reports coming out this week:
  • Q3 2024 Comp Sheet: Digital Health & HCIT
  • Q3 2024 Comp Sheet: Agtech
  • Analyst Note: Healthcare Sessions Conference Recap
  • Q3 2024 Comp Sheet: Gaming
  • Q3 2024 Global M&A Report
  • Q3 2024 Comp Sheet: Foodtech
 

Trivia
Answer: D

Over the past 18 months Lightmatter has raised an astounding $709 million. It's the latest sign that investors are still hungry for novel solutions to the AI-induced compute crunch. You can read more about Lightmatter's growth trajectory here.

This edition of The Weekend Pitch was written by Rosie Bradbury and Jacob Robbins. It was edited by James Thorne and Ron Prichard.

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