Drastic Devaluation: Raisin Loses Unicorn Status

Berlin-based fintech company Raisin (“Weltsparen”) has lost its Unicorn status for the moment. According to research by Finanz-Szene.de, Swedish investor Kinnevik values its stake in the deposit broker at only 185 million Swedish krona- the equivalent of $18.9 million (€17.9 million)- as of the end of March. Compared with the fair value at the end of December $24.9 million (247 million Swedish krona), this represents a fairly drastic devaluation of around 25% within just three months.

In its Q1 report, Kinnevik puts its own stake in Raisin at a rounded 2%. Extrapolated, this would correspond to an enterprise value of roughly $948 million (€895 million). According to the latest available list of Raisin shareholders, the Kinnevik stake as of December 9th last year was actually 2.48%. If this has not changed by the end of March, the “Weltsparen” parent would only have a valuation of $762 million (€720 million).

Now, to a certain extent, such calculations are of course always gimmicks. Particularly as this is the assessment (which is also slightly distorted by currency effects) of a single investor. It may be that other shareholders continue to assign a higher value to the Berlin-based financial startup. And to be fair, it must also be emphasized: Raisin’s management has never commented on its valuation, so it has never claimed unicorn status for Raisin. However, all this does not change the fact that the rating is quite a disappointment when measured against the expectations of the scene. Because, just as a reminder:

Raisin had, after all, merged with its Hamburg-based rival Deposit Solutions (“Zinspilot”) last summer. Strictly speaking, the roughly $741-$953 million (€700-€900 million) are the combined valuation of two highly valued local fintech companies; and …

After a valuation in the billions had already been proclaimed from the circle of shareholders for Deposit Solutions alone in 2019, the recognized industry magazine “Deutsche Startups” even put a price tag of $2.65 billion (€2.5 billion) on the merger company last summer. The $741-$953 million (€700-900 million) that Kinnevik (a VC known to be highly reputable) is now quoting are miles away from that.

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Raisin is growing – but not as much as hoped for

In fact, there is a whole series of indications that suggest that the meager valuation should not be dismissed as gimmicky. Rather, it should be seen as the result of a certain loss of traction. On request, Berlin emphasizes that it has generated steady growth in recent years “despite an unfavorable interest rate environment for our business model” – on average more than 40% per year. Nevertheless, for classification: At the end of 2019, it had still been said in an interview that in that year “the key figures had approximately doubled”.

With the publication of business results, the deposit broker traditionally holds back. However, a few figures have become public over the years – and these also indicate that the business with the brokerage of overnight and fixed-term deposits has developed less rapidly than investors had originally hoped. For example, in 2020 (the last year before the merger), earnings at Deposit Solutions did not increase – instead, they fell by 9% to $17.9 million (€16.9 million. Now, special effects did play a role here, namely the loss of two large “product banks”, including, according to our information, the then HSH Nordbank (the “product banks” are the banks where the deposits end up…). And yet: It is highly unusual for the earnings of a highly funded growth company to decline on an annual basis.

At the old Raisin, on the other hand, the most recent business figures that can be viewed are from 2018; they are considered to be of only very limited significance. However: At $18.2 million (€17.2 million), the Berlin-based company fell well short of its target for that year (which had been set at $24.6 million (€23.2 million). At least one indication that Raisin also did not progress as quickly as hoped in the years before the merger. “As a startup, we set ourselves very ambitious goals,” Berlin says in this regard. The interest rate environment had developed differently than hoped, resulting in the company’s growth “being pushed back a bit.”

There are also more recent warning signs. Thus Finanz-Szene and our partner medium Finance Forward learned in the autumn of 2021 from several source in agreement that it should give in the course of the fusion of Raisin and Weltsparen by year-end a large financing round. However, this never happened. The reasons are unclear – but it would be reasonable to assume that the management at the time was not able to push through the valuation that was considered appropriate. Raisin does not want to comment on this complex.

Now it must be emphasized: Both the old Raisin and Deposit had raised a great deal of funding in the years before Corona, so they were and are certainly not under pressure to raise fresh funds. At the same time, however, this makes Raisin/Deposit the only major German fintech that has not announced a funding round since the outbreak of the pandemic. The last Raisin funding dates back to July 2019 (i.e. 34 months ago), for Deposit it was September 2019 (i.e. 32 months ago).

Most recently, Raisin has been in more of a consolidation mode

Whether the merger of the two deposit brokers should be interpreted as a defensive alliance in retrospect remains to be seen. However, there are many indications that Raisin must have been in a kind of consolidation mode recently. At least the number of employees registered with Linkedin has been stagnating for some time. According to figures from the career network, the number of employees has shrunk by 3% over the past two years and by 1% over the past twelve months. The figures are adjusted for the effect of the acquisition: Of the 494 employees Raisin counts on Linkedin, 110 work at the Hamburg site – the former headquarters of Deposit Solutions.

With interest comes growth – that’s the calculation

Nevertheless, recent business policy decisions also speak in favor of the consolidation thesis. At the beginning of May, for example, Raisin terminated all of its “business customers” and wants to focus completely on retail customers for the time being – a drastic cut, especially since this affects not only deposit brokerage, but also the retirement provision product. However, the company emphasizes that no business will be closed down. This also applies to the USA, where, according to information from Finanz-Szene, one of the two country heads recently left, namely Paul Knodel (the other US head, namely Philipp von Girsewald, is still on board). “In the U.S., we want to grow and see great potential in this market,” the Raisin statement reads. “Especially in the last weeks, the U.S. developed very dynamically for us, driven by the interest rate development. Not only did we gain many clients, but we were also able to significantly increase assets under administration.”

In fact, the reference to the interest rate development is important – especially since the interest rate turnaround is now also beginning to take shape in Europe. Raisin’s reasoned calculation is that if nominal interest rates rise, investors will also become more interested in deposit products again – and then the traction that has evidently been lost somewhat recently will also kick in again.

“The emerging interest rate turnaround within the EU will mean that our growth will increase significantly – and in a very stable way for the next few years. In the U.S. and the U.K., we are already seeing significant growth increases as a result of the interest rate steps taken by the respective central banks in combination with a currently gloomy outlook on the stock markets,” the statement says – which sounds quite plausible. And so it cannot be ruled out that Raisin will not only go down in history as the German fintech that was the first to lose its Unicorn status – but also as the fintech that was able to win it back soon after.

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(Featured image by nikolaus_bader via Pixabay)

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