The great push for profit

Pressure on leadership teams to reach break-even is mounting.

Originally published in The AltFi Weekly Newsletter, for more like this sign-up now.

If you haven’t already noticed, something’s amiss in the world of fintech.

Founders are leaving, business models are being ‘remodelled’, and senior management teams are being swapped.

In the last week alone Tandem overhauled its business by announcing a radical shift towards a paid credit card, Trussle lost its founding CEO in an abrupt exit, and Monzo’s co-founder and deputy CEO became the latest senior exec to leave the digital bank.

This isn’t new—the shift started last year with the departures of the CEOs of companies like Nutmeg, Metro Bank and Growth Street—and this trend will likely continue throughout 2020.

Why is this all happening? I put it down to three factors.

Firstly, while this is hardly new, a realisation among investors that private fintech valuations have become a little lofty. Secondly, a growing awareness among all industry participants that a recession is due. And thirdly, the elephant in the room, SoftBank’s lumbering Vision Fund which clearly won’t be leading the next fintech unicorn rounds as many had expected.

Put these three together and you have a venture capital runway for startups that’s shortening by the day, while pressure on leadership teams to break-even is mounting.

Last year profit became fashionable in fintech, this year I expect it’s going to become essential.

On an aside, yesterday Christian Faes, a stalwart of the alternative lending industry and AltFi Powerlist 50 member, stepped aside from his role as CEO of LendInvest after 11 years to become Executive Chair.

Faes has overseen the growth of LendInvest into a very profitable fintech, and will now “focus on what I love doing as a founder and entrepreneur, which is the outward-facing work for the company and working on our strategy and vision.”

We wish Faes and incoming CEO Rod Lockhart all the best in their new roles.