It has been fifty-three years since Stanley Kubrick’s landmark film “2001: A Space Odyssey” was first released, and exactly two decades since that particular year went from being fiction to history. While talking AIs in the form of Alexa, Siri and others have now become part of human history as well, we can all feel ever so slightly relieved that the antics of HAL 9000 still belong in the realm of fiction.
Having said that, traveling recently on a London tube carriage with my daughter, she pointed out to me that every single passenger bar none was sitting, head bent at a forty-five degree angle, face fixated on the cool glow from their smart phones, totally lost to the outside world as the aforementioned AIs were busy stimulating the dopamine receptors in their respective brains. So while HAL 9000 may not have become reality, perhaps William Gibson’s dystopian vision from the Neuromancer trilogy very much has.
In any case, turning back to the history and fiction of fintech, 2021 was a landmark year in many regards, and those of us who lived through it are left feeling dizzy, excited, and exhilarated. While it is hard to summarize a year in a few words, here are some of the key trends of this year.
- Valuations went sky high. 2021 was a year of record valuations, and records were being broken at such a rapid pace, that it was difficult to keep track of what a “market valuation” for a start up should really be. Many of us in the fintech community found themselves going back and forth between the extremes of struggling with the valuations of new deals, to celebrating the successes and progress of our portfolio companies as a result.
- Invisible fintech becomes real. Embedded finance is now mainstream, and we now see more and more non-fintech businesses using embedded finance and fintech as their monetization routes. Your core business may not be fintech, but fintech increasingly became the route by which companies were looking to monetize their user bases. And we started seeing more and more proof that even the big tech giants will increasingly turn to fintech for monetization.
- A tale of two cities. In the rapidly evolving world of e-commerce, it was the best of times and it was the worst of times. While demand for e-commerce went through the roof, the supply side got so disrupted, it was simultaneously the best time and the worst time to be an e-commerce player. Fintechs that were funding and enabling payments for e-commerce merchants went through a similar roller coaster, and the best of them were able to capitalise on the volatility and turn it into a huge opportunity.
- Everybody is now invited to the fintech party, and hedge funds were no exception. This was the year of the likes of Tiger Global and Coatue coming out in force, and becoming king makers and game changers, acting fast, decisively, and with big bazookas. Very few funding rounds went by where the stance of the big hedge funds turned growth investors were not a big topic of discussion.
- Crypto goes boom. While crypto has always been a big part of fintech, this was the year where investments into crypto changed by an order of magnitude. Oh, and a sovereign country adapted bitcoin as legal tender. There was in fact a quantitative shift in the amount of money that flowed into crypto related start ups, and
- Web 3.0 and Metaverse were big trends in the tech world, and their reflection in the fintech universe were NFTs that went right to the heart of this question: What does it mean to own something that only exists in the digital world? In the art world, Beeple was at the forefront of tackling this question, and profited handsomely, becoming multimillionaire overnight. In a world where so much content only exists digitally, the fintech world started tackling the questions of ownership and value attribution in earnest. One can only hope that this will continue to benefit the digital artists and creators out there.
- Hiring is the ultimate competitive advantage: Forget proprietary tech or other moats around your business. Those that managed to hire top talent in this market had an edge nobody else could match. This was perhaps not surprising, since after record funding rounds, all these start ups and growth companies had to deliver on their ambitious plans, and AI or not, it turns out we all still very much need fellow humans.
So looking back at all these trends, 2021 was in many ways a year of extremes and contradictions, and this was very much reflected in our world of fintech as well.
Next up will be predictions for 2022, so stay tuned, stay healthy, and keep your seat belts fastened!