In 2022, we waved goodbye to many fintech businesses due to increased uncertainty and a drop in venture capital financing from the previous year.
Regarding economic uncertainties, 2022 will undoubtedly be one of the most challenging years due to Vladimir Putin’s ruthless Russian invasion of Ukraine.
The fintech sector was surprised by layoffs since it had become accustomed to ever-growing employee ranks and large amounts of venture capital money, whose expansion was only matched by a high rise in the valuations assigned to these businesses.
Pre-product firms being valued at tens of millions of pounds or more have become all too frequent. Those who have products but sales that, in some cases, are in the billions, much below what is viable.
Therefore, it may not come as a surprise when several businesses closed their doors due to the economic unrest and the overheated market.
In this post, we examine the fintech and cryptocurrency businesses that failed.
Fast
One of the first prominent fintech casualties in 2022 occurred in April with the online checkout firm Fast.
Fast, situated in Silicon Valley, raised $120 million for its “one-click” offering, including funding from illustrious backers like Index Ventures and Stripe.
According to TechCrunch, the firm that Domm Holland and Allison Barr Allen founded needed to generate six-figure revenue while having a monthly burn rate (how much it was spending) of up to $10 million.
Trailblazers occasionally failed to reach the summit of the peak. However, Holland noted that even in those circumstances, they set a precedent that everybody would follow.
“Fast has done that by bringing one-click and headless checkout into the mainstream. Buying online has been forever changed by the incredible team at Fast. The dedication, brilliance and spirit of this remarkable team are unparalleled and will forever be the legacy of Fast.”
Nuri
In August, the German neobank Nuri announced that it would shut down and declare bankruptcy.
The reason for Nuri’s shutdown was probably due to the weakness in the crypto markets. Nuri, formerly known as Bitwala when founded in 2015 to make Bitcoin “spendable,” has expanded to include current euro accounts, cryptocurrency wallets, and currency vaults.
To keep things running smoothly, Nuri, like many other businesses, has already let go of several employees. This happened in June when the company announced that 20% of its 220 employees in Berlin had been let go.
According to CEO Kristina Walcker-Mayer, at the time, they are sure that the insolvency procedures give the most significant basis in the company’s current circumstances for formulating a workable long-term restructuring model.
By October, the company had permanently closed its doors after failing to find a purchaser.
Bank North
One of the newest digital banks in the UK, Bank North, announced in October that it would be shutting down after four years.
The bank provided middle market loans to SMEs focused on companies outside London and the southeast of England. It was founded in 2018 by Jonathan Thompson, its CEO, David Broadbent, and Nancy Butler, its commercial director.
Bank North secured its banking license in 2021(when it also rebranded from ‘B-North’). Taking on a competitive but arguably underdeveloped market looked to be working well.
Along with development financing, bridge financing, and short-term funding loans, it provided up to £5 million.
However, after starting financing at the beginning of 2022, the firm ultimately found it difficult to conclude a £50 million series B investment round at a valuation of £106 million.
In the end, LHV UK, the UK division of the publicly traded Estonian financial services company LHV Group, purchased the company and its loan book.
FTX
We move on to FTX, last but not least.
The truth about what transpired at Sam Bankman-FTX Fried’s and how it declared bankruptcy in November 2022 would be known for a long time.
Few people, however, contest that it seems one of the worst corporate fraud instances in contemporary history.
Despite only three years old, the firm has a staggering $32 billion valuation.
One of the most successful fintech entrepreneurs in the world, Bankman-Fried, was praised. He also appeared to be positioning himself as one of the most significant future philanthropists with his comments on “effective altruism” and his promise to donate his riches.
The truth was somewhat different. His “other firm,” Alameda Research, allegedly borrowed $10 billion in customer assets from FTX in violation of the platform’s guidelines controlling the safekeeping of money.
According to Reuters, there are currently between $1-2bn missing and unaccounted for, with the financial repercussions set to linger for several years.
Bankman-Fried is scheduled to be deported from his base in the Bahamas to the US. At the same time, his two closest collaborators, Gary Wang, Bankman-Fried’s co-founder of FTX, and Carolyn Ellison, the former CEO of Alameda Research, have admitted to fraud and are ‘co-operating with authorities’.
