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Home Lead-In

Fintech House Of Cards: Are We Expecting More Cash Bonfires?

by Rarzack Olaegbe
2 years ago
in Lead-In, Click Send
Reading Time: 3 mins read
Fintech
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If it is a trend, it will pass. If it is profitable, it will thrive. I know many thriving Fintech firms in Nigeria did not raise funds as start-ups. Why those who raised funds did not last? The interest rates have gone up. Venture capitalists’ interest has gone down. They are not doling out cash anymore. They are not ready for cash bonfires. Fintech House of Cards is collapsing.  

On The One Hand

I have written about some bootstrapped Fintech firms. These firms have survived. They are thriving. They have become thrivers. They are climbing. They are on the ascendancy. PFS did not raise any funds. It is the leader of its genre. SystemSpecs did not raise funds. It is the leader of the specs. Parkway did not raise funds. It is the leader of the park. SecureID did not raise funds. It is the leader of its space.

Chams did not raise funds. It is the leader of the pack. Signal Alliance did not raise funds. It is the leader of the alliance. Computer Warehouse did not raise funds. It is listed on the exchange. Do not say these legacy tech firms came when fundraising was not a trend! What was the trend then? Hard work? Talent? Serendipity?  

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What is trending now? Good money chasing a bad business? Are crooked people getting funds? “As an industry, we should all be braced to hear about many more failures.” That is Jenny Lefcourt, an investor at Freestyle Capital. “The more money people got before the party ended, the longer the hangover,” Jenny told NYT, which chronicles the rise and fall of several once high-flying companies.

WeWork. Convoy. Olive AI. These tech firms have filed for bankruptcy. Or closed shops in recent weeks. It is part of a broader trend. Tech companies are running out of time, out of funds, and out of sight! And venture capital firms are cutting their losses.

The situation has led to what the NYT dubs a “cash bonfire,” using the example of virtual events provider Hopin; once valued at $7.6 billion, which sold its main business for $15 million.

On The Other Hand

Data from PitchBook shows approximately 3,200 venture-backed firms in the U.S. have gone out of business. Those start-ups had raised $27.2 billion. The report notes that the 3,200 figure was probably on the low side, as many businesses shut their doors quietly. Quietly.

Carta – this company provides financial services for Silicon Valley start-ups – said 87 of the firms on its platform that raised at least $10 million had shut down this year. This has been “the most difficult year for start-ups in at least a decade,” Peter Walker, Carta’s head of insights, wrote on LinkedIn.

In The Long Term

PYMNTS examined this trend this year in the monthly “Pivot to Profitability” series, a collaboration with Sezzle. “We had such a hot market for so long. It is money-chasing money. Reason had left the building,” Sezzle CEO, Charlie Youakim told PYMNTS’ Karen Webster in February. He said companies that raised $300 million to $400 million had just $20 million in revenue when the hammer came down. “It’s absurd,” he said. That is a $380 million Fintech House of Cards!

Youakim and Peter Beckman, CEO and co-founder of Treyd, spoke of the urgency among start-ups to rein in costs amid an uncertain environment.

In The Short Term

Revenue is irrelevant. Unless it is a profitable revenue. The failure expectation is part of the investment. It is a trend.

 

Tags: Cash BonfiresFINTECHFintech House Of Cards
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Providus Bank has acquired the 34% equity stake held by the Asset Management Corporation of Nigeria (AMCON) in Unity Bank Plc, marking a decisive step toward the long-anticipated merger between the two financial institutions. The deal, valued at about N6.5 billion, saw AMCON offload its decade-old holding in Unity Bank to Providus at a price of N3.18 per share, representing a 110per cent premium to the bank’s prevailing market value of N1.50 on the Nigerian Exchange. Industry analysts said the transaction signals a turning point for Unity Bank, which has faced prolonged struggles with weak capitalisation, rising non-performing loans, and declining market relevance. By transferring AMCON’s strategic stake, they noted, Providus has strengthened its hand as it pushes for regulatory approvals to consummate a full merger. AMCON acquired its Unity Bank stake during the 2011–2012 banking sector clean-up after the global financial crisis exposed balance sheet vulnerabilities across second-tier lenders. Its divestment, according to banking sources, underscores the corporation’s gradual exit from long-held equity positions as it focuses on recovering toxic assets and reducing its systemic footprint. “AMCON’s sale to Providus is significant not just for Unity Bank but for the entire financial system,” said a Lagos-based investment banker. “It shows the government is serious about cleaning up legacy interventions while paving the way for stronger private-sector-led banks.” Unity Bank shareholders are set to benefit from the deal’s pricing structure. At N3.18 per share, Providus’ offer more than doubles the bank’s trading value, giving investors a rare premium exit in a market where bank stocks often trade at steep discounts. For minority shareholders, the merger if approvedcould also unlock value by combining Providus’ niche strength in corporate banking and digital services with Unity Bank’s broader retail and SME base. Providus, one of Nigeria’s fastest-growing mid-tier lenders, is widely seen as using the Unity Bank deal to accelerate its ambition of achieving national bank status. By absorbing Unity’s branch network and customer base, the lender would scale its operations beyond its current limited licence, positioning itself to compete more aggressively with tier-one institutions. “The synergies are clear,” said a senior Unity Bank executive familiar with the talks. “Providus brings balance sheet strength and digital innovation, while Unity offers reach and brand equity, especially in northern Nigeria.” Following AMCON’s divestment, the proposed merger will be subject to approval from the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC), and Unity Bank shareholders. Both banks are expected to present a detailed merger scheme in the coming months, outlining share swap ratios, post-merger governance, and capital plans. Market watchers say regulatory scrutiny will focus on whether the combined entity meets CBN’s revised recapitalisation thresholds, which mandate higher minimum capital bases for Nigerian banks. The Providus–Unity transaction comes amid a wave of consolidation moves triggered by the CBN’s ongoing recapitalisation drive. Several lenders are exploring mergers, acquisitions, or fresh capital injections to meet compliance deadlines ahead of 2026. “This is the first big-ticket transaction of the recapitalisation era,” said a financial markets analyst. “It won’t be the last.”

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