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Nu, the parent company of Nubank, reported its fourth-quarter financial performance, and in response to rapid revenue growth and improving economics, the company saw its value drop 9% in regular trading today after falling sharply in recent sessions. Now worth just $8 per share, Nu is underwater from its IPO price and down about a third from its all-time highs.

It’s hardly alone in its struggles. Fintech valuations have taken a whacking in recent months, even more perhaps than the larger software market itself; SaaS and cloud shares have hardly covered themselves in glory recently, but declines in fintech stocks may take the cake when it comes to negative returns of late.

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Why do we care? Because fintech may be the best-funded startup sector. TC reported earlier this year that fintech startups collected around a fifth of venture capital dollars last year. A full one in five bucks from an all-time record venture capital year, we should add.

It’s not an exaggeration to say that as fintech goes, so too goes the startup market, and therefore the profile for venture capital returns.

So how are we to balance falling public-market valuations for fintech companies and simply bonkers-level private-market investment? That’s our question for today. To get our heads around the issue, if not the solution, let’s start with a refresh of fintech venture capital results, the fintech liquidity crunch and what has happened to fintech stocks.

Unless you own many shares of financial technology startups, this will be fun.

Venture capital loves fintech

The amount of capital afforded to financial technology startups is hard to fathom. In 2021, from a total of $621 billion of invested private-market capital generally under the venture aegis, some $131.5 billion across 4,969 deals went to fintech startups. That data, from CB Insights, also indicated that dollar volume for the sector was rising more quickly than deal volume. Which, if you run the numbers, allows for greater deal size over time.

This is from a sector that raised $49 billion in 3,491 deals back in 2020. That’s a 168% gain in a single year.

You know the names: Brex and Ramp and Airbase raised in 2021, just as Stripe did. And FTX and OpenSea. The list is replete with huge companies that help consumers and companies alike manage, invest and move money around.

Chime raised a massive $750 million Series G last August, a deal that pushed its valuation to around $25 billion. Which, you think, naturally makes the company an IPO candidate for 2022, right? Only maybe, it turns out. Forbes reports that the company’s IPO has been pushed back to late 2022, perhaps even the fourth quarter. That was before Nu reported lots of growth and its first full-year adjusted profitability and got a tenth of its value decapitated after suffering declines in prior recent trading sessions.

Does Chime want to go public in that market? Probably not, with investors casting aspersions on one of its best-known global cognates.

Why is this bad?

Nearly $400 billion has gone into fintech startups from the start of 2018 through the end of 2021. That’s an amount of money that is hard to grok, but we can better understand it as a rising pressure. The more money that goes into any particular sector’s startups, and the longer that money sits illiquid, the more that investors have anticipations for exits — which means liquidity, naturally, from things like IPOs.