Building value in a FinTech

The sale of former FinTech darling Monitise to Fiserv for £70m serves as a clear reminder of how FinTech valuations can ebb and flow. Monitise has gone about its financing a little differently to other FinTech companies, having listed back in 2007. Between 2007 and today the share price has fluctuated, reaching as high as 80p in 2014, before falling back. Fiserv’s offer represents 2.9p per share.

Meanwhile, Ratesetter's recent appointment of City stalwart Paul Manduca as Chair is being seen by some – including the Financial Times – as a signal that an exit is on the cards.

So just how valuable are London's FinTech giants? Trying to place a value on a rapidly scaling tech-driven business is a notoriously tricky task.

Perhaps the best way of understanding how valuable some of these companies might be is to think about where they derive their value.

There are several elements of a young, scaling FinTech company that carry value.

The team

In the early stages, the team is the business. They understand the technology, the brand and the emerging customer base. They know where the strategic partnerships lie. They ‘get’ the core idea better than anyone.

But, as the business scales, the relative value of individual team members diminishes. People move jobs, new people join, quality can become inconsistent, and the business grows to a point where it can no longer rely on any one individual.

In growing companies, value comes from a strong management cohort, rather than individual, who can support the business to scale. This is important since businesses that feel too centred around a single individual can put off investors. Being over-exposed to the moods, performance and even the health of a CEO, can present a risk factor in the eyes of the investor.

That is why scale-up FinTechs like Funding Circle have invested in building significant management bench strength, especially in core areas such as risk and marketing.

Revenue generation

Some companies might be able to make their way to IPO without doing much by the way of monetising their products, but this only happens in extreme cases. Investors need to see a clear revenue generation model that has been proven to work.

UK investors have led the way in scrutinising existing revenue, so whilst other markets may be more forgiving of a pre-revenue FinTech company, companies in the UK will not be so fortunate.

Transferwise’s recent announcement of profitability, for example, will have been very well-received by investors, as it shows their FX product can generate significant revenues and cover costs of acquisition.

The fan-base

Building a large customer base – even if it remains largely unmonetized – can add significant value to a company, as it provides a clear line-of-sight to revenue generation. Just look at Monzo, they’re building value across brand, tech, team and more, but the fast-growing, supportive customer base is crucial. A company that can enthuse and manage a large fan-base is an attractive prospect to a VC.

Growth potential

A key point of value in a FinTech business is the potential for significant growth with minimal rise in operating costs. This means a large and clearly addressable market, and a realistic go-to-market strategy that delivers lots of customers alongside favourable unit economics.

If a company can generate net profit on a per-customer basis, and then show they have hundreds of thousands (or even millions) of potential customers, then the company will be pulling in a serious valuation.


The technology that underpins the business can add significantly to its value. A VC is going to be looking for the threat of competition, and proprietary technology can be a significant barrier to entry for potential new competitors.

If all of the company’s technology is outsourced, or openly available on Github, it’s going to be more vulnerable to copycat competitors that might have deeper pockets.

Value, much like beauty, lies in the eye of the beholder. What is valuable to one buyer, might mean little to the next.

For a retail bank eyeing up a peer-to-peer lender, the lender’s customer base might not be their main priority, even if it numbers into the tens of thousands. What might be more valuable to the bank is the technology that underpins the product.

For a tech company eyeing up the same peer-to-peer lender, they might place more value on the regulatory permissions obtained by the lender, or the data they’ve already gathered around lending models.

For any FinTech founder looking to build value in their business, the best advice is to make sure you have a clear revenue generation model and that you can keep acquisition costs and operational costs down as you scale.

If you’re planning a future exit strategy, be very clear to potential buyers where you think the value is.

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