Trade Republic fires employees
One of the best-known German fintechs is the Berlin-based neobroker Trade Republic. Only recently did he collect 250 million euros from investors in an expansion of his last financing round. As the Handelsblatt reports, it has increased its valuation to five billion euros. Just a week later, however, the company announced that it would be separating from some employees. According to the Handelsblatt, the restructuring was presented at an internal town hall meeting. A spokeswoman is said to have said: “Yesterday we presented to our employees how we focus in order to achieve our strategic goals: In the future we want to position ourselves more purposefully on the product side and see what contributes to profitability in the short term.” Accordingly, some employees would have to leave the company or be deployed in other areas. Employees who celebrated the success of the last round of financing with their colleagues may now have to go. But there shouldn’t be any downsizing. A company spokeswoman told the Handelsblatt that the size of the company would remain at 700 employees. While there is a reduction in staff in some areas, there is an increase in jobs in other areas, such as software.
Klarna is also affected
In addition to Trade Republic, another star in the fintech sky is also affected by layoffs. According to the Handelsblatt, the most valuable start-up in Europe, Klarna, is planning to cut 700 of 7,000 jobs. The reduction is necessary in order to limit the high losses of the company. They would keep increasing. Large amounts of money are supposed to flow into customer acquisition, which is making investors increasingly nervous. For example, the start-up’s rating drops considerably. A year ago it was estimated at almost 46 billion euros. As part of a potential new round of funding, the value could potentially drop to around $30 billion. As the website Finance Forward reports, Klarna has always been the absolute favorite of investors. Actual business figures were only available for the largest investors in a round of financing. The rest were only allowed to get to know the management briefly via video call. And yet millions and millions of euros flowed to the startup. There should not have been any real analysis. According to Finance Forward, some investors would now have to get used to conducting due diligence again before investing millions in a fintech.
Times are getting tougher for fintechs
The well-known fintechs Trade Republic and Klarna are just the tip of the iceberg. According to Heise, the German-British payment provider SumUp also has to lay off around 100 employees in Brazil. It is unclear whether jobs will also be cut in Germany. The banking startup Kontist and the cryptocurrency specialist Nuri are also forced to lay off. According to Finance Forward, around 930 employees across the European fintech scene were fired within a few weeks.
The reason for the wave of layoffs in the industry is the worsening of the economic situation. The Ukraine war, rising inflation and interest rate hikes are causing problems for fintechs. While there has been real hype about the (still) loss-making startups in recent years, investors now want to see an improvement in profitability. The shortfalls should therefore be contained. In order to maintain their success, the young companies now have to prove that they can continue to generate profits in the future. “Just a year ago, fintechs could choose their investors,” Volker Brühl, Professor of Banking and Finance at Goethe University in Frankfurt, told Handelsblatt. In the meantime, however, a lot has changed. “The idea of efficiency has come to the fore, the profitability limit should be reached quickly.” According to Finance Forward, large investors are expected to be much more risk-averse today. In the fourth quarter of 2021, 14 financing rounds in excess of $100 million are said to have been completed. In the first quarter of 2022 there were only half as many. The funds of the venture capitalists are still well filled. For Thomas Prüver, tech expert and partner at Ernst & Young, the decline is not a surprise. “But it was also clear to everyone in the market that the financing volume would not triple every year,” he explains to Finance Forward. In 2022, new times are dawning for fintechs, in which it will be much more difficult for them to get the funds they need to continue their business.
Nicolas Flohr / Editor finanzen.net
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