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By Ryan Kuhn. A Harvard MBA, Ryan founded M&A advisor Kuhn Capital 35 years ago. Since then, the firm has initiated hundreds of high-IP mid-market M&A transactions together worth more than $3 billion. This article was first published 8/23/2023 and revised 5/7/2024.

In Q1 2024, the fintech industry began what may be a slow and partial recovery from its shocking collapse beginning back in Q3 2021. But what’s attracting fintech investor interest now is a much different sort of company. Rather than big, late-stage B2C models, many are pretty much the opposite — small, early-stage B2B models.

Entrepreneurs, start your engines.

What Happened

In slightly more than a year, Fintech’s 2022 crash drove fintech investments down 85% or from a high of $182 billion to a low of $29 billion in Q4 2022. (I define fintech “investments” as the combined value of the industry’s IPOs, M&A transactions and private company financings.)

This dramatic drop hit the industry’s biggest players hardest — public companies, unicorns and later-stageFintech bubble growth stories. In fact, IPOs went extinct from Q4 2021 till the first quarter of 2024 when they generated a smidgen of former interest, about $1 billion.

What didn’t get dinged then were young companies and mobile apps that challenge creaky 3rd world banks and insurance companies. In a word, the Q3 2021 asteroid took out the dinos but spared many of the small, fast-evolving mammals living in their shadows.


Observers (like Carta and SP Global among others) claim some combination of the factors listed below tipped investors’ scales from greed to fear:

  • Manic valuations (up to 20x revenue)
  • Oversaturation (particularly among the former segment darling — B2C);
  • Recession threats;
  • Falling tech valuations overall;
  • Rising interest rates;Fintech investor
  • Fewer government pandemic handouts so less consumer spending;
  • Inflation

(Could going back to valuation basics have saved many a fintech investor from bursting bubble shrapnel? For a refresher on how to do that see How to Value a Going Business and How to Value a Start-Up.)

What Now?

Some signs of tentative recovery:

  • The number of private company fundings hit 945 in the first quarter of 2024. That’s up 35% from the post-crash low of 704 in Q1 2023. If this trend continues, the number of 2024 funding transactions will be the industry’s highest ever recorded. And another record: half of the financings so far have been for less than $5 million each, making the proportion of small deals the highest since 2016.
  • The same phenomenon is evident with M&A — a riot of small deals. Just before the crash, in Q3 2021, the average M&A transaction closed for $380 million! This last quarter it was $27 million. (For expansive analyses of fintech industry performance, see FT Partners’ Q1 2024 Quarterly Fintech Insights.)

So What Types of Fintechs Attract Money Today?

Smaller, Earlier-stage Fintechs


  • Mainly because they need less cash. For investors, less cash means less at risk in uncertain times. You can spread the same amount of dry powder around to more bets at the craps table. Let a thousand flowers bloom.Fintech investor
  • Second, because they’re early-stage, their pay-off is up to five years away, presumably when exit valuations and liquidity will have recovered.
  • Third, they’re an economical way for investors (especially “strategic” investors) to stay at the table watching industry developments.
  • And fourth, they permit investors to keep more cash in reserve for when better, less uncertain times return.

Fintechs Addressing “Blue Ocean” Markets

A few examples:

  • Fintechs have a long way to go before fully penetrating the money moving and storage business. These are the huge legacy banking, insurance, money management, and money transfer institutions that move and pool trillions of dollars each year.
  • Fintech mobile solutions also enjoy a long-tailed growth curve especially in developing nations, which don’t (and may never) have the ground facilities to support reliable, low-cost delivery of financial services. Check out McKinsey’s analysis of fintech’s explosive growth in Africa. In fact, Africa combines both types of growth opportunity — competition against clunky legacy players and wireless solutions.

B2B Is In, B2C Is Out

Those waves of government pandemic checks that drove at-home consumer spending, buoying demand for B2C payments companies, are over. So are low interest rates that boosted the buy now/pay later and neobank B2C models.

And in those days (just a few years ago, after all), the huge legacy players hadn’t yet come up with their own B2C fintech solutions like Zelle. Now the flavor of the day is B2B fintechs that provide tools to –

  • Ease the tasks of SMB CFOs and CEOs;
  • Help make legacy financial services players more efficient (as opposed to competing directly against them);
  • Enable something called B2B2X. Meaning they sell to businesses that bundle their app together with the other services they offer their end-users. It’s aggregation without acquisition.

In sum

  • Small is beautiful;
  • B2B is back;Fintech Opportunity
  • Yes, funding and M&A may be harder – they take more time and cost more — but they’re still happening;
  • Mammals beat dinos.

© 2024 Kuhn Capital, Inc. All Rights Reserved

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Ryan Kuhn is the founder of Kuhn Capital (bio). This article is not the product of AI. AI is a product of this article.