Tag Archives: Startups

The Next Fintech Mafias

The startup mafia that came out from Paypal has been well documented. I was curious to take a look at the privately held fintech startups and analyzing who might be next Paypal mafia based on startups that are led by ex-employees of the companies below.

To qualify for this list, you need to be a privately held fintech startup as of Dec 2024, that has been in existence for at least 4 years AND ex employees had to have raised at least $1M in funding for their new startup. I took at look at data from Harmonic. Here are the results of the number of startup founders who came out of the following companies:

  • Stripe – 96
  • Consensys – 70
  • Klarna – 47
  • Revolut – 47
  • Addepar – 30
  • Plaid – 28
  • Brex – 27
  • Gemini – 26
  • N26 – 25
  • Nubank – 20
  • Gusto – 19
  • Monzo – 19
  • Carta – 18
  • Better – 16
  • Wefox – 15
  • Circle – 13
  • AngelList – 12
  • Chime – 11
  • Razorpay – 11
  • Checkout – 11
  • Pleo – 10
  • Deel – 8
  • eToro – 8
  • Payoneer – 8
  • Justworks – 8
  • Chainalysis – 7
  • Rippling – 6
  • Navan – 5
  • Bolt – 5
  • Pilot – 4
  • Remitly – 4
  • Socure – 4
  • Airwallex – 4
  • Rapyd – 4
  • Ramp – 4
  • Fireblocks – 2
  • Tipalti – 2
  • Digital Currency Group – 2
  • Lithic – 1
  • Deserve – 1
  • Mercury – 0
  • Rho – 0
  • Unit – 0
  • Alloy – 0

If there are companies I should add to this list, please comment.

2009 vs 2024, some similarities

The period of 2023-2024 bears notable similarities to 2008-2009, particularly in terms of layoffs, down markets, and the emergence of new technologies. Let’s explore these parallels in more detail.

Layoffs

2008-2009: The Great Recession was marked by widespread layoffs across various industries, particularly in finance, real estate, and manufacturing. Companies were forced to downsize significantly to stay afloat, leading to a sharp increase in unemployment rates. The economic downturn triggered a cascade of job losses as consumer demand plummeted and businesses cut costs.

2023-2024: Similarly, the current period has seen a surge in layoffs, especially in the tech sector. Companies like Google, Meta, and Amazon have announced substantial job cuts, citing economic uncertainty and the need to streamline operations. The global economic environment, influenced by inflation, supply chain disruptions, and geopolitical tensions, has pressured companies to reassess their workforce needs, mirroring the cost-cutting measures seen during the Great Recession.

Down Markets

2008-2009: The financial markets were severely impacted during the Great Recession. The collapse of Lehman Brothers and the ensuing financial crisis led to a dramatic downturn in stock markets worldwide. Investor confidence was shaken, leading to massive sell-offs and a prolonged bear market. Governments and central banks had to intervene with stimulus packages and monetary easing to stabilize the situation.

2023-2024: The stock markets have again faced significant challenges. High inflation rates, rising interest rates, and geopolitical uncertainties have contributed to market volatility. Investors have become increasingly risk-averse, leading to declines in major stock indices. While not as severe as the 2008-2009 crash, the current market conditions reflect a period of adjustment and uncertainty similar to that earlier economic crisis.

New Technologies

2008-2009: Despite the economic turmoil, the period saw the rise of significant technological advancements. The adoption of cloud computing, specifically Amazon Web Services (AWS), was a major advancement, which reduced the cost to launch new software product for both startups and established companies. The smartphone revolution, led by Apple’s iPhone, began to take off, changing the way people interacted with technology. Social media platforms like Facebook and Twitter started to gain massive popularity, laying the foundation for the social media-driven world we live in today.

2023-2024: This period is also marked by the emergence of groundbreaking technologies. Artificial intelligence, particularly generative AI models like GPT-4, has made significant strides, transforming various industries and creating new opportunities. The expansion of blockchain technology and the growing interest in Web3 and decentralized finance (DeFi) mirror the innovative spirit of the late 2000s. These technological advancements promise to reshape the economic landscape, just as smartphones and social media did over a decade ago.

Conclusion

The parallels between 2008-2009 and 2023-2024 are striking. Both periods are characterized by significant layoffs, down markets, and the rise of transformative technologies. While the specific circumstances and industries affected may differ, the underlying themes of economic upheaval and technological innovation remain consistent. Understanding these similarities can provide valuable insights into navigating the current economic climate and anticipating future trends.

Seed / Series A deal volume : 2023 vs prior years

I pulled up 2023 deal volume via Pitchbook for all Seed and Series A rounds for US based startups, was curious to see how 2023 went from a pacing perspective vs prior years. 4,668 companies raised a Seed or Series A round in 2023. As expected it was down from the COVID / ZIRP era of 2020 to 2022. In the peak year of 2021 8,206 companies raised a similar round, so in 2023 it was down 40% from this peak year. The last time the number of companies that raised a similar number of 2023, was going back 7 years to 2016.

In terms of 2024, I predict that we will see LESS companies raise than 2023, this is for a few reasons. One main reason is that many of the 2023 announced rounds , were actual rounds that took place in 2022 but the announcement of the round was in 2023, so I think 2023 data was actually much lower than the 4,688 companies that I found via the Pitchbook query. Another reason is that there are some funds that will be raising money from LPs in 2024 and I predict that their pacing is going to be slower than 2023. I don’t anticipate VC firms investing at a fast pace than 2023, so even if VC firms have dry power aka callable capital from LPs, I don’t see them increasing their pacing at this particular stage. Overall, 2024 will still be a good year to raise capital and many VC firms will be active, but it might look more like 2013, in which 3,889 startups raised a Seed or Series A round of financing.

Where the puck is going

There is a famous quote “Skate to where the puck is going to be, not where it has been.”

In terms of early stage startup activity , I wanted to take a look at which geographies in the United States were getting the most traction from an early stage venture capital deployment perspective. We know that COVID created some displacement and a shift in where early stage startups were being formed. I took a look at data available on Pitchbook to see the leading states , cities and zip codes. Given that I wanted to get the latest trends “where the puck is going” from a geo perspective, I queried all Seed and Series A deals in the 2nd Half of 2023.

From a state perspective, the leaders were:

  1. California : 633 companies
  2. New York: 295
  3. Massachusetts: 128
  4. Texas: 118
  5. Florida: 78
  6. Washington: 74

From a specific city perspective (not metro areas):

  1. New York City: 265 companies
  2. San Francisco: 216
  3. Austin: 64
  4. Los Angeles: 51
  5. Boston: 39
  6. Seattle: 39
  7. Miami: 35
  8. Palo Alto: 33
  9. Cambridge: 28
  10. Chicago: 25

In terms of Zip Codes, this is a good way to measure density:

  1. 94104: San Francisco : 23 companies
  2. 94114: San Francisco: 23
  3. 10013: New York City: 19
  4. 94306: Palo Alto: 16
  5. 10001: New York City: 14

As you can see from the data: California and New York dominate in terms of where early stage startups are being created. New York City is now the #1 city for startup formation. Historically it was San Francisco, but many startups moved during COVID due to several factors, mainly due to strict COVID restrictions and also increased homeless / drug / crime activity. San Francisco is gaining momentum with the surge of AI (artificial intelligence) related startup and Y Combinator (#1 accelerators in terms of exits) being back to in-person cohorts.

I will caveat that although the data is for announced rounds that took place the 2nd half of 2023, many rounds are typically delayed, so they could have taken place 6, 12, 18 months ago, which defeats the purpose of the post, as I wanted to share what is happening now from a geo perspective. Will revisit this post in 6 months and see if the data changes in term of trends.