To join the mailing list or receive a PDF copy, comment “send me the PDF” (and leave your email) or “join the mailing list”. The largest Insurtech company in the world isn’t in San Fransisco or Silicon Valley — but in Shanghai. As a matter of fact, Zhongan has more customers than any other insurance company in the world. Zhongan was founded in 2013 and 4 years later, went public.  The average company in our cohort has a market cap of $6.5b, founded 9 years ago, and is growing at 65% YoY. What makes these companies so successful? It may surprise you to learn: FinTechs are some of the fastest growing listed companies, as PurpleBricks grows @ 150% YoY, ZhongAn @ 84%, Quidan @ 70%, and RedFin @ 43% YoY.  Zhongan — arguably the worlds most successful InsurTech business, has an average gross written premium of $1.97 Chinese entrepreneurs are building $10b FinTech businesses in the span of 4–5 years. ZhongAn (insurance) began trading in in 2014 and Quidan (short term lending) in 2015.  Square generated $452m in revenues in their last quarter, as they grow 21% YoY. Its market cap is now $20b. Subprime lending is out of favour as shares of Quidian drop 40% since the IPO. Elevate completed its IPO at 50% of its expected valuation range.  Valuations for lending companies vary greatly as LendingClub trades at 2.3x their quarterly revenue run rate, Qudian @ 3.8x, Elevate @ .4x, and Credible @ 16x (pro-forma at IPO).  Find this, and much more in our 47-page slide deck.

1. Venture Backed
IPOs in FinTech
THOMAS OLSZEWSKI
04/2017Lessons from Publicly Traded FinTech Companies

2. FinTechs make up a small piece of total listed tech companies
2
300+ public tech companies
±100 enterprise
SaaS companies
<20 public
FinTechs

3. Although a rich pipeline of private
FinTechs suggest this may change
3
$4,500m
$1,955m
$654m
$620m
$521m
$509m
$488m
$417m
Total Equity Funding

4. This presentation will look at 6
recent venture backed IPOs in FinTech
$5.4b market cap
$12b market cap
$7.9b market cap
$4.7b market cap
2014 2016 2018
$1.7b market cap
2012
S&P 500
£250m market cap
$1.2b market cap
(appendix)
IPO Market Cap

5. Across 4 markets segments, in the US, UK and China
Lending:
Payments:
Insurance:
Real Estate:

6. What makes these companies so sucessful?
PurpleBricks
Zhongan
Qudian
RedFin
LendingClub
Square
0% 40% 80% 120% 160%
20%
26%
43%
70%
84%
150% $19.0b
$13.0b
$3.4b
$1.8b$1.3b$1.3b
Last reported revenue growth rate Current Market Capitalization (USD)
Public filings

7. China’s $8bn payday lender - Qudian

8. China was the FinTech IPO leader in 2017. How do they do it?
6060:HK
QD
PPDF
LX
JT
$931m
$954m
$101m
$345m
$186m
Company Ticker Funds Raised Investors
FinTech Trends to Watch in 2018 CBinsights

9. Qudian (QD) raised $900m in a IPO valued at
$8.4b 3 years after the company was founded
9
2015 2016 2017 (Q1-Q3)
$646m
$213m
$35m
2015 2016 2017 (Q1-Q3)
18.2m
6.1m
1.2m
Revenue Number of Active borrowers
Q3 2016 - Q3 2017,
Revenue growth +308%
Q3 2016 - Q3 2017, active
borrower growth +174%

10. With a $139 average loan size, QD resembles a payday lender
10
$139 Average loan size
2.4 Months loan duration
54.5% Approval rate
.50% More than 1 month delinquent
100% mobile
Draw downs distributed to Alipay
accounts
Assessing ability to repay but
willingness to do so
Based on social, shopping,
behavioural data, demographics

11. What makes QD so successful? A strategic partnership (for
distribution) with Ant Financial, the financial arm of Alibaba
11
QD engage majority of customers
through AliPay (product owned by Ant
Financial)
Ant Financial “Zhima Credit” provides
data for credit scoring
Ant Financial operates its own
consumer credit business

12. Qudian is having hard time since the IPO as
regulators crack down on short term lenders
12
Shares are down 40%
Since IPO 4 months ago

13. Zhongan - intelligent insurance

14. Founded in 2013, Zhongan is another unprecedented success
story, raising $1.5b in a Softbank lead IPO @ a $8.5b valuation
14
2014 2015 2016 2017
$944m
$490m
$351m
$129m
492m policy holders
2014 -2017 GWP growth
7.2m billion policies
$1.97 avg customer
spend
http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=06060&country=hkg
Softbank acquires 5%
of Zhongan in IPO

15. It has a diverse product offering
15
32%
7%
9%
4%
48%
Lifestyle
• eCommerce shipping returns,
dmanage, merchants bonds
•Phone damage
•Drone insurance
•Furniture
•Online payment fraud
•Bike share accidents
Travel
•Flight accidents, delays
•Flight ticket changes
•Train accidents
•Hotel cancelations
Customer Finance
•Credit guarantees
•Consumer finance platforms
Health
•Clinic visits
•Online clinic visits
•Wellness
•Employee health
•Specific disease
•Children
Motor
•Comprehensive
•Tyre damage
http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=06060&country=hkg

16. But like QD, relies on a few key partnerships for most of its sales
16
Alibaba’s Taobao, a digital
shopping mall, accounts
for 47% of revenues
89% of revenues come from
channel partnerships
Lifestyle Travel Finance Health Other
4.4%6.9%9.3%
31%
47%
https://www.bloomberg.com/gadfly/articles/2017-09-15/tiny-zhongan-plants-an-acorn-for-china-s-fintech-giant

17. Real Estate

18. Tech companies in real estate are going after the
large market of commissions on residential property
18
Country Transactions Average Sale Avg Commission
Annual
Commission Pool
USA 5.6m $223k 5% $62b
Australia 500k $471k 2% $4.7b
UK 1.2m $275k 1.4% $4.6b
NZ 90k $318 2.8% $801m
Total $72b
https://www.slideshare.net/MikeDelPrete/2018-emerging-models-in-real-estate-report

19. 3 leading online brokers target different
segments of the market with different fee structures
19
16k 50k 43k
Annual Revenues
Market Cap
2.5-3%1-1.5%2.5-3%Listing fees
Transaction est
$350m $117m
Avg Sale Price
$370m
$875k $221k $459k
(private) £850m $1.8b
Private LSE: PURP NASDAQ: RDFN
https://www.slideshare.net/MikeDelPrete/2018-emerging-models-in-real-estate-report

20. Fixed fee models dramatically undercut
incumbents while offering similar services
20
Fee is the same
regardless of sale price
Online agents offer
broadly the same
services
Typical agent charges
£3000 on average vs
PurpleBricks flat £849
https://www.slideshare.net/MikeDelPrete/2018-emerging-models-in-real-estate-report

21. Purplebricks has quickly achieved dominant
position in UK market with 74% of online listings
21https://www.purplebricksplc.com/investors/latest_results

22. PurpleBricks stands out as an incredibly fast growing public
company, with revenues increasing +150% YoY
22https://www.purplebricksplc.com/investors/latest_results

23. In the US RedFin growing steadily for 15 years,
albeit at a slower cap than Purplebricks
23http://investors.redfin.com/static-files/33df6c63-2545-45ab-a6f1-a4105ca96d08

24. Payments

25. Square: started with a simple payments
device - now offers many products
25
Point of sale systems
Employee management
Business intelligence
Small business lending
eCommerce
Square cash

26. Nears profiability as revenues approach $500m quarterly
26Square Shareholder Letter

27. Banking - the next chapter for square?
27
One of two FinTechs pursuing a industrial
banking charter*
In an Accenture survey Square ranked
ahead of Google, Amazon, and Paypal as
non-banks companies consumers would
bank with
App Store rank for Square cash is 40 vs
Venmo @ 72
The other being Varo Money. SoFi withdrew its charter application: CBinsights Square Strategy Teardown

28. 87% of Squares revenues comes from
transaction processing fees
28The other being Varo Money. SoFi withdrew its application: CBinsights Square Strategy Teardown, Square Shareholder Letter
2%
11%
87%
Transaction Based
Revenues
Subscriptions Hardware

29. As transaction costs remain high,
Squares gross margin in 2017 was 38%
29The other being Varo Money. SoFi withdrew its charter application: CBinsights Square Strategy Teardown

30. Square capital has facilitated more than $2.5bn
of loans with an average loan size of $6k
30CBinsights Square Strategy Teardown
Partnerships with Upserve and
bigCommerce allow Square to
make loans outside of its
existing merchant base

31. Lending in the USA - LendingClub

32. FinTechs have grown rapidly to account for
30% of consumer lending volume in the USA
32Transunion: FinTech Taking Large Share of Personal Loan Market

33. LendingClub, +86% annual CAGR from 1Q 2014 - 1Q 2016
33http://ir.lendingclub.com/Cache/1001230258.PDF?Y=&O=PDF&D=&fid=1001230258&T=&iid=4213397

34. Dropped -30% in 2Q16 and never recovered
34http://ir.lendingclub.com/Cache/1001230258.PDF?Y=&O=PDF&D=&fid=1001230258&T=&iid=4213397

35. Market reacts negatively as LC optimises
for profitability (rather than growth)
35

36. Growing revenues at 26% not enough to excite investors
36http://ir.lendingclub.com/Cache/1500107799.PDF?Y=&O=PDF&D=&fid=1500107799&T=&iid=4213397

37. 2017 had two new listings of online lenders operating in the USA
37
NYSE: ELVT
$580m annual revenue
Growing at 30% YoY
IPO market cap of $300m
Subprime lender
ASX: CRD
$18m pro-forma 2017
Growing at 110% YoY
IPO market cap of $300m
Consumer finance

38. Conclusion

39. A selection of Europes emerging FinTech startups
39
Banking for immigrantsBanking data API Insurance for self employed
Account for the Underbanked
Drone insurance
Mortage broker
Home energy finance
SME Accounting + Banking
Lending API
Money Transfer API
Business Banking Recurring payments

40. Takaways
40
Pace of FinTech IPOs
to grow exponentially
over the next 3 years
China has been a home
to some of the fastest
growing FinTechs
Payday lenders are
very out of favour in
public markets

41. Takaways
41
Mega trend: “re-bundling”
of services as Square
enters new markets
Public FinTechs
require tremendous
growth and scale to
please investors
We are in the early
innings of PropTech
penetration
2014 2015 2016 2017
$944m
$490m
$351m
$129m
Zhongan GWP Growth

42. Twitter Medium Quora
Disclosure - author of this presentation is invested in: Purplebricks, RedFin and ZhongAn

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44. Appendix

45. Everbank a US based online bank
45

46. Growing deposits for 15 years organically and via acquisitions
46
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$19.6b
$18.2b
$15.5b
$13.2b$13.1b$13b
$12b
$8.1b
$7b
$5.5b
$4.2b$3.7b
$3.1b
$2.1b$1.7b$1.5b$0.6b
25% 16 year CAGR deposit growth
IPO values
Everbank at
$1.1b
Acquired
for $2.5b

47. IPO’d in 2012, raising $192m. Acquired
by TIAA Creff in 2016 for $2.5b
47
$110k
Average deposit size, 2×
the industry average2
575k Customers1
8% Leverage ratio, implying $12.50
lent for every $1 of deposits1
14.5% Return on average equity1
Online and retail locations
Offering competitive
investment products
Attracting deposits with high
yields on savings
S-1 IPO Filing 20121, 10-k Filing in 20162