Hi, fintech fam! 💜

As a journalist, I am often asked why I cover fintech. My answer is simple:

The stories we tell matter.

I've worked in newsrooms, observing and selecting stories for publication.

Journalists and editors have the final say in shaping the industry and society. We influence entrepreneurs, executives, and future leaders.

It's a big responsibility, especially with layoffs in major media companies.

Supporting independent journalists, especially female-led ones, is crucial.

Reader support keeps us going, and I'm proud of rewriting fintech's narrative to reflect our diverse and innovative community.

Also, ICYMI a few updates:

1. Make sure to attend Fintech Is Femme's Leadership Summit on April 8 during New York Fintech Week. Early bird tickets are selling fast!

2. Booking ads for this newsletter is easier. Check out my sponsorship storefront here if you'd like to reach 50,000 fintech founders and business leaders.

Now, onto the insights!

WHY UPGRADE?

There’s a big difference in how the mainstream media covers fintech and how I do. Every week, I will provide you with the latest fintech news (minus the BS), profiles of inspiring women in fintech, and insightful analysis to help you stay ahead of the competition.

For our premium members, I send out updates 3x a week through our new column, "On Performance.” These columns will provide tactical advice to improve your entrepreneur and business leader performance.

Plus, premium members support female-led journalism and keep this work going. Because of your support, Fintech Is Femme is more than just a newsletter; it's a community for women to connect, learn, and support one another.

INNOVATION

A Decade of Unicorn Evolution

Last week, I explored the impact of community and networking events on fintech growth, courtesy of data from the World Economic Forum's "Future of Global Fintech" report.

This week, I want to emphasize that true innovation happens when individuals disrupt and transform business models, requiring a shift in mindset. 

Aileen Lee, prolific investor and founder of seed-stage venture capital fund Cowboy Ventures, is a notable example of such disruption.

A decade ago, Lee famously coined "unicorn" for VC-backed startups reaching a billion-dollar valuation in a decade. 

Now, in her recent article "Welcome Back to the Unicorn Club, 10 Years Later" and on an episode of the Pivot podcast with Kara Swisher and Scott Galloway, she's dissecting the evolution of startups.

Lee's research and POV serve as critical insights for fintech leaders. We’re diving into 

1. Notable trends throughout the evolution of unicorns over the decade

2. Future of AI and a decade of super unicorns

3. Insights on what makes a unicorn today

10 Years Sourcing Unicorns 

In 2013, Cowboy Ventures was dipping its toes into the startup scene. 

To amp up their investment game, they created a dataset highlighting US-based startups hitting the billion-dollar valuation mark within a decade – the birth of "unicorns." 

Being a unicorn was like catching a glimpse of startup magic, requiring the perfect blend of timing, luck, innovation, and maybe a dash of privilege.

Their initial list featured 39 companies, mainly in the consumer game. 

Fast forward a decade, and the herd grew to 532. 

One of the biggest changes of the decade is that while 80% of unicorns used to be consumer companies, today, 80% are enterprises. That's a seismic shift. 

We’re seeing this trend in the fintech space, specifically. 

In 2023, VC activity in fintech hit $34.6 billion, a dip from $61.4 billion in 2022, according to data from Pitchbook. 

In 2019, consumer fintech was the cool kid, grabbing 59.4% of the VC pie. Fast forward to 2023, and enterprise fintech is having its moment, securing a solid 72.1% slice. 

Why the shift? Blame it on better exit opportunities, a crowded consumer space, and some not-so-fun macroeconomic conditions – higher interest rates, inflation, and geopolitical uncertainty.

Businesses and enterprises are riding the stability train, securing recurring revenue streams and tapping into massive markets. While B2C feels the pinch, B2B companies work with a more predictable cash flow. 

Tune into this episode of Humans of Fintech, where we dissect the trend toward B2B fintech.

Digging deeper, Cowboy Ventures found that 93% of these unicorns are what they call "paper corns" – their valuation is on paper only, still in the private club. 

And 60% are the ZIRPicorns, thriving on that last round of funding in the low-interest era of 2020-2021.

Over half of these "unicorns" are trading below a billion bucks in the secondary markets, and the runway they cruised on in 2020-2021 is running out. According to Lee, the unicorn batch might slim down to around 350.

Plus, the capital efficiency that made the 2013 unicorns shine like stars has taken a nosedive. 

Back then, enterprise companies boasted 26x capital efficiency. This new batch, whether consumer or enterprise, has an average capital efficiency of 7x, a significant drop.

And if you're eyeing Apple, Microsoft, or Salesforce, you might be better off investing in the public markets than some of these unicorn wonders.

Diversity Needs Improvement 

In 2013, joining the unicorn club felt like an Ivy League and Silicon Valley exclusive. Most founders hailed from top-tier schools like Stanford and lived in the Bay Area, many with computer science degrees.

Today, the number of founders has ballooned from 100 to 1,300, making the growing list no longer a school monopoly. About 40% of co-founders today don’t have “technical” degrees. 

While the Bay Area still holds the unicorn crown, its reign declined from 69% to 45%. 

Meanwhile, New York claims 19% of the pie and houses 100 unicorns. Almost 40% belong to the crypto/web3 or fintech realms – think OpenSea and Chainalysis.

In terms of gender, Cowboy Ventures described the numbers best: "Pathetic." 

There are more founders named Michael, David, and Andrew than female CEOs of unicorns. If this trend continues, gender equality will occur around 2063.

Currently, 14% of co-founders have a female partner (compared to a mere 5% in the past), and 5% of companies boast a female founding CEO (up from zilch in 2013).

Take a peek into the exclusive public unicorn club, and you'll find a slightly better gender diversity rate at the top – 14% female CEOs (2 out of the elite 14) and 21% female co-founders (3 trailblazers). 

There's still a long way to go.

Welcome to the Era of Super Unicorns

Thanks to AI, the next decade will likely see plenty of super unicorns, i.e., companies with a $100 billion valuation.  

OpenAI is gearing up to be the first in this new batch. Last year, 80% of all venture capital was thrown at AI-related startups. 

One factor causing these unicorn stampedes is the insane influx of cash into venture capital. Funds are bulking up faster than ever, throwing it at the hottest new thing. Today, that’s AI. 

This raises the question: Are we in bubble territory regarding valuations? 

Generative AI will become critical in all the software we build. It’s not about a valuation bubble, but which companies will be playing a short-term game versus solidifying their positioning for the long term?

Plus, the next decade will see the rise of super unicorns due to more sectors emerging today. 

In the past, companies were “one-size-fits-all” solutions. Now, there are 19 sectors, ranging from climate and healthcare to mobility and logistics. Technology is spreading across all business realms, including EdTech and FinTech. 

In short, technology is taking over every nook and cranny of society.

What Makes a Unicorn

1. Category Creators: 

These founders cooked up an idea in a market that either didn't exist, or everyone thought wasn't worth the fuss. 

Take Guild, for instance. Denver-based and on a mission to upscale hourly workers, they're partnering with enterprises to give these folks the skills and education they need to climb the career ladder. 

Guild's not just good for business; it's a double-bottom-line company doing good for society, noted Lee. 

2. New Paradigm Pioneers: 

Drata, the brainchild of two brothers in San Diego, is a stellar example. 

They didn't come from traditional tech or security backgrounds but had an idea for a better mousetrap. 

In a space where they were the third or fourth wheel, Drata hit the bullseye with a security and compliance platform for enterprises. It was a new way of doing things, and customers were praising it.

Golden Age for Entrepreneurs

You hear it always: It’s the best time to start a company. 

I believe it. 

VCs will knock if you gain some traction. Historically, some of the biggest success stories were born during downturns. 

It's all about scrappiness, the long game, and the fact that building a company is cheaper and easier now. 

Money isn't as affordable as it was three years ago, but office space and talent? They're accessible.

Venture is evolving, too. Lee is part of All Raise, a nonprofit shaking up the venture industry's composition and culture. The progress is real – from 8% to nearly 16% of women in the industry. 

It's still not great, but hey, it's a start.

As for creating the next unicorn, software has continued to take center stage, focusing on budgets, security, and trimming excess; enterprises are tightening their belts.

Founders take note. If you have an idea that delivers quick value – whether to consumers or enterprises – it's your time to shine. The bar's higher now, but the opportunity is still ripe.

And don't let the talk of shrinking herds fool you. The software power is in play, meaning the investment in chips, computing, and storage is growing.

Translation: we're in for a future filled with even more powerful and exciting software companies.

So, there you have it – the unicorns are galloping in unexpected sectors, founders are rewriting the rules, and the software game is getting stronger. 

It's a wild ride, but that makes it so damn exciting.

_{WTF ELSE?}

• Top 7 use cases for Gen AI in fintech

• Fintech funding freeze may thaw in 2024

• Fintech exit activity continued to fall in 2023

• The Chief Financial Officer's role in the fintech evolution

• Tech providers will find a lucrative niche in helping banks deploy generative AI in 2024

• DOJ and SEC unveil charges in $1.9 billion HyperFund cryptocurrency fraud

_{I WANT IT, I GOT IT}

• 📚 Today’s Read: The Authority Gap: Why Women Are Still Taken Less Seriously Than Men and What We Can Do About It. Journalist Mary Ann Sieghart provides a startling perspective on gender bias in our everyday lives.

• 👀 Today’s Watch: Queenpin. Innovator. Mother. Griselda is a woman of substance. And Sofia Vergara is killing it in this new Netflix limited series. I’m obsessed. Also, how refreshing is it to see more complex female-centered stories in Hollywood?

• 🍣 Today’s Eats: Chili Oil. I put it on everything. Have a flavorless dish? Add chili oil. There are a ton of cool recipes online to make your own, but I just buy a giant jar of Lao Gan Ma Spicy Chili Crisp from Chinatown and keep it on my dining table at all times.

_FINTUNES

🎵 Naomi Sharon - Nothing Sweeter

Caribbean-Dutch singer Naomi Sharon is giving us a soothing performance of her new single. I love these recordings. It’s a perfect way to wind down at the end of the day.

That’s all for now! Stay safe, everyone. Hug your loved ones. See you Thursday!

Love,

Nicole

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