Fintech Venture Capital

Robinhood, Revolut, Game Stop, and the Arrival of Fintech

Game Stop sits at a $90 stock price this morning. But this of course does not paint the full picture. Fintech has arrived.

Game Stop (MYSE: GME) sits at a $90 stock price this morning (03/02/2021), a no-nonsense normal share price with no bells and whistles when looks in isolation. But this of course does not paint the full picture. Fintech has arrived.

Game Stock has just declined from one of the most bizarre, yet completely explainable events the financial markets have ever seen. In just over a month, GME rose from $17 to $347, and has started to retreat back to the financial value the traditional market has put on it. This event highlights the power of the new order of financial behemoths, fintech companies.

The combination of retail banking, acceleration of democratised finance, and venture capital has led to Revolut, Robinhood, Monzo, Starling Bank, N26, eToro, among others capturing the attention of everyday retail banking customers, transforming finance in front of everyone’s eyes. No longer do consumers have to queue outside a bank for a meeting with a bank manager; or cultivate a relationship with a professional broker to start investing in a diversified share portfolio; it’s all done on the 6iinch screens we all carry around as an extension of our body. When we layer over the top of an accessible financial platform a sub-culture of millions of frustrated consumers who want their own ability to vent on social media and find community in their frustrations, the Game Stop saga occurs. Social media has become the market research; behavioural economics and crowd mentalities have long been a core tenet of investing 101. Where the majority of the market goes or leaves, is where the money flows, and where the price swings occur. This mirrors this latest episode in how fintech is taking over the financial world, as this eruption in a low-lying share didn’t occur off of the back of a Credit Suisse research note by a tenured analyst, but a Reddit chain r/wallstreetbets.

Robinhood is now the public face of the power of fintech for the everyday person. If you did not know who Robinhood was in 2020, you do now. A US focussed company, Robinhood is funded by a myriad of investors, and last year secured one of the largest valuations of the private start-ups out there at $11.2bn after a Series G investment of $200m. This has been dwarfed by their latest raise of $2.4 billion backed by current investors Sequoia Capital, NEA and Ribbit Capital, firms that participated in Robinhood’s last major funding round last year. The reason for this raise being:

“Robinhood co-founder Vlad Tenev told the online audio meeting group Clubhouse over the weekend that the National Securities Clearing Corp., a DTCC subsidiary, asked for a deposit of $3 billion late Thursday — a figure it ultimately reduced to $1.4 billion — to support the surge in trading volume. “

The Street

A VC backed start-up has blown up to the level where a clearing house is worried about liquidity. If there was a moment for pessimism surrounding fintech companies’ ability to succeed to dissipate for good, this maybe it. No longer can Wall Street and the biggest retail banking incumbents shrug off the impending market share loss they will inevitably face if & when the Robinhood & Revolut’s of the world continue to scale to every community around the world. Scale has already been reached. Apps which cater for core services are well and truly here and are here to stay. Fuelled by subculture, and the power the everyday person feels emboldened with as they can access a world historically reserved for big institutions, the arrival of fintech is well and truly here, and a force already being reckoned with.

Sources:

Crunchbase: https://news.crunchbase.com/news/robinhoods-new-200m-series-g-gives-it-an-11-2b-valuation/

The Street: https://www.thestreet.com/investing/robinhood-raises-another-2-4-billion-as-app-volume-surges

The New York Times: https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html

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