Fintech Expert Discusses how We can Best Understand 100x Revenue Multiples for Affirm,, Rapyd, Other Financial Tech Giants

Lex Sokolin, CMO at blockchain firm ConsenSys and Co-Head of Fintech and DeFi at ConsenSys Codefi, recently discussed how can we “best understand” the 100x revenue multiples for Fintech firms Affirm, Checkout, Rapyd, and several others.

Sokolin notes that “money in motion rules the day in the public markets.” However, he points out that it is generally easier to “generate transactional revenue against a flow, because the flow is endogenous.” He explains that you have to take market share and actually be a participant, but you don’t “need to cause the flow.”

He adds that monetizing stocks is more challenging, since you need to “accrue them and cause your prospects to trust you over large periods of time with meaningful assets.” Sokolin further notes that “such monetization is — at least in theory — much more sticky, and far more valuable on a per-dollar-in-revenue basis given a longer lifetime value of the customer.”

Sokolin, a Columbia University School of Law graduate (JD, Corporate and Securities Law and Transactions), confirms in a blog post:

“Over $1 billion in raises announced last week, and over $10 billion in Fintech company value creation: with $450 million at a $15 billion valuation, Affirm more than doubling after its IPO to $30 billion, lending enabler Blend raising $300 million, and payments enabler Rapyd raising $300 million.”

While discussing what all these Fintechs have in common, Sokolin first points out that Affirm has achieved $500MM+ in revenues and $4.6B of underwritten gross merchandise volume (“total dollar amount of all transactions on the Affirm platform during the period, net of refunds”).

Sokolin adds that the company is currently worth around $30 billion on the public markets, up from about $2 billion back in 2019. Notably, that’s a 60x multiple “on top of a $110 million loss.”

He further notes:

“Yes, never bet against the PayPal mafia, and Yes, the growth is phenomenal. And yet it is a 60x multiple on top of a $110 million loss.”

He continues:

“In lending, we’ve also got Blend, which topped up $300 million. Blend is a ‘unified platform’ for consumer lending, from mortgages to auto to credit cards and personal loans. It sits on top of the long tail of American banks and credit unions, and repackages the lending process to be automated to the reported tune of $3B per day.”

According to Sokolin, what’s interesting here is that the platform is actually “digitizing the store-front of the banks, and repackaging into digital distribution.” He adds that we “suspect that the embedded API story will be one of the largest growth vectors in the future.”

Sokolin also mentions that Checkout has reached a $15 billion valuation and EBITDA profitability. Based on available information, he’s guessing that the EBITDA is the $10-20MM range, “printing maybe $50-100MM in revenue (Adyen comp), which is still a wild 100-300x on revenue.”

He further notes that the firm provides an all-in-one payments solution for merchants, and it also “aggregates processing with acquiring, creating a bundle that is easy to purchase if you are a global retailer.” As noted by Sokolin, the target market is “upstream from Stripe, going after the larger commercial platforms which have international connectivity.” There also seem to be certain “pricing advantages to Checkout over Stripe, though it is hard to disambiguate,” Sokolin writes.

He also mentions that venture investors, and public market investors “attempting to mirror the narratives of venture investors, love revenue.” He claims that “their love of revenue is matched only by their love of revenue growth.” He further notes that traditional equity research analysts “don’t love revenue nearly as much, knowing that it can be bought or grown unprofitably, without any return on equity.” However, if you’re attempting to land a huge Fintech exit, “nothing says ‘winning’ like a 30-100x revenue multiple,” Sokolin acknowledges.

Sokolin concludes his extensive blog post by noting:

“Who is winning the Fintech game of largest levels? We can point to Nubank and Tinkoff, or perhaps even Starling. But if we really want to see where money is coming to rest, look no further than Bitcoin and Ethereum. That’s a story for another time.”

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