The AltFi view on staying solo: Fintechs can go all the way

Weekly Leading Article

The relationship between risk and reward when it comes to money is, conventional wisdom says, exponential. Hang on in there and the payback will be of a greater and great magnitude. 

Investing is, after all, just the marshmallow test for adults.

An extreme example is Laszlo Hanyecz who bought two pizzas with 10,000 bitcoin almost 11 years ago. If he’d hung on to the coins his stake would be worth £460m today. Ouch.

Investing in Coinbase, which went public this week in a $76bn direct listing, about the same time Hanyecz tucked into his margaritas in 2010 would have produced similar results. 

Early investors, as well as later-stage investors to a lesser extent, have harvested stunning returns from Coinbase’s equity with some seeing an 8,000x return on their capital. 

The fintech mega event also proves something else for start-ups disrupting finance. It pays to stay independent. In other words, don’t sell. Go all the way. But will other disruptors follow?

Most—but certainly not all—founders will tell you that they are not in it for the money. These, somewhat ironically, tend to be the best founders with the highest predictive power of success. 

Plaid is another example that springs to mind. In what was a jaw-dropping deal to kick off 2020, the firm was set to become part of the Visa stable at the princely sum of $5.3bn. 

Fast forward one year or so and Plaid’s change of shift to stay independent has paid off handsomely with a $450m new round of funding valuing the business at a whopping $13.5bn.

PensionBee, which has stayed fiercely independent all the way to its upcoming IPO on Wednesday, may also prove the point.

Staying solo can also help in the long term sustainability of the company. Assuming, as most fintechs do, that founders and investors reward staff with meaningful equity options, talented team members will likely stick around if the potential for a long term payoff is embedded in the strategy.

While selling to incumbents is a perfectly respectable thing to do and not necessarily bad for the end consumer, Plaid and Coinbase as well Stripe are proving that fintech can go all the way. 

Stay solo fintech, if you can.