The Solution To The Fintech IPO Shortage

Every morning, we run The Narrative Machine on the past 24 hours worth of financial media to find the most on-narrative (i.e. interconnected and central) stories in financial media. It’s not a list of best articles or articles we think are most interesting … often far from it.

But for whatever reason these are articles that are representative of some sort of chord that has been struck in Narrative-world.


Scott: Hey, how’s your girl, man? 
Luis: Ah, she left me. 
Scott: Oh. 
Luis: Yeah, my … mom died, too. 
[Beat; Scott gapes in awkward silence]
Luis: And my dad got deported. 
[More silence]
Luis: But I got the van! 
Scott:[quickly] … It’s nice!
Luis: Yeah, right?!

Ant-Man (2015)

The Solution To The Fintech IPO Shortage [Forbes]

The headline is bullish. The tone is positive. But the article is dour as hell. Why haven’t we seen Fintech IPOs, it asks, then provides the answer: because they don’t have sustainable business models, the companies don’t have clear value propositions, they can’t get to scale, IPOs did terribly last year and they haven’t done anything to change the actual economic proposition of financial services products to end users.

Other than that, Mrs. Lincoln...

Still, the piece manages to end with the kind of relentless optimism that you have to admire on some level. If they can figure those fourteen things out, expect more IPOs! Still, it’s an interesting question, given how powerfully non-financial tech and VC has managed to cultivate a supportive narrative. The problem is pretty simple, and it’s a narrative problem:

Everyone knows that everyone knows that financial services switching costs are extremely high.

It’s the source of the fundamental economic malaise affecting these companies – their stratospheric customer acquisition costs. It’s the source of the scale problem. It’s the reason the business models aren’t sustainable. Having a product that disrupts something customers hate isn’t enough if they still can’t fathom the pain in the ass that is figuring out, learning and actually pulling the trigger to do something different.

The successful Fintech plays have (as the article points out) either served other financial services businesses directly or have figured out how to make the complicated process of switching or simply starting to use a financial product people haven’t used before, well, easy. Any such company that isn’t actively owning its Cartoon on this dimension – continuing to obsess over addressable markets and consumer frustration with incumbents – will continue to miss the boat.

Start the discussion at the Epsilon Theory Forum

The Daily Zeitgeist

ET Zeitgeist: Raccoons Never Sleep

By Ben Hunt | May 28, 2021 | 5 Comments

Lemonade (LMND) isn’t just an insurance company. No, no … they’re an AI Company! ™.

Plus Chamath is up to his old tricks.

I hate raccoons.

Inflation as Ad Campaign

By Ben Hunt | May 24, 2021 | 0 Comments

An ET Pack member sent me this. Anyone else come across ads that directly call out inflation expectations? Would love to collect more screenshots like…

Many People Are Saying … Bitcoin is Art

By Ben Hunt | May 24, 2021 | 0 Comments

The Bitcoin Is Art thesis that I put out back in 2015 (The Effete Rebellion of Bitcoin) and recently put forward again (In Praise of…

The Zeitgeist | 1.24.2019

By Rusty Guinn | January 24, 2019 | 0 Comments

An American mutual fund gatekeeper does PR for China, DNC gunning for Wall Street, multiple missionaries live from the pulpit in Davos.

The Zeitgeist | 1.23.2019

By Rusty Guinn | January 23, 2019 | 1 Comment

Talking ourselves into a recession, trusting our employers, and a fine example of government shutdown fiat news.

The Zeitgeist | 1.22.2019

By Rusty Guinn | January 22, 2019 | 0 Comments

Welcome back, folks. Today, it’s all about cloud and blockchain, but no cannabis. Also: tech earnings, Trump can’t make a deal, and corporate debt.

DISCLOSURES

This commentary is being provided to you as general information only and should not be taken as investment advice. The opinions expressed in these materials represent the personal views of the author(s). It is not investment research or a research recommendation, as it does not constitute substantive research or analysis. Any action that you take as a result of information contained in this document is ultimately your responsibility. Epsilon Theory will not accept liability for any loss or damage, including without limitation to any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Consult your investment advisor before making any investment decisions. It must be noted, that no one can accurately predict the future of the market with certainty or guarantee future investment performance. Past performance is not a guarantee of future results.

Statements in this communication are forward-looking statements. The forward-looking statements and other views expressed herein are as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and there is no guarantee that any predictions will come to pass. The views expressed herein are subject to change at any time, due to numerous market and other factors. Epsilon Theory disclaims any obligation to update publicly or revise any forward-looking statements or views expressed herein. This information is neither an offer to sell nor a solicitation of any offer to buy any securities. This commentary has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Epsilon Theory recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.