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The European VC market is in turmoil. The number of capital venture deals in Q1 2023 fell by 19.2%, while their value fell by a whopping 32.1% quarter-over-quarter to just under 12 billion Euros.

VCs can no longer enjoy the low-interest rate environment of the past decade, with the European Central Bank (ECB) increasing key interest rates by 1.25% in 2023, making raising capital more costly. Investors are becoming risk-averse as well. The first quarter of 2023 hit European VCs with dry powder shortages, leading to an 8-year funding rate low of just 3.4 billion EUR.

Where 2022s fintech was considered one of the fastest-growing industries, its 2023 counterpart seems to suffer just as much as VCs. While the NASDAQ rose by 16.8% in Q1 2023, fintech stocks stayed flat, underperforming both the tech and finance sectors. Is the industry in decline, how and why is the sector turning from growth to profitability, and what does this indicate about the future?Current Affairs And Valuations

The alarm bell for fintech rang when TriplePoint Venture Growth and Schroders marked down their stakes in Revolut, suggesting that the privately traded neobank giant lost between 15% to 46% in its value. Schroders also slashed the valuation of its holdings in Atom Bank by 31%. The public market mirrored those private equity concerns as the EV/NTM Revenue median multiplier decreased to 1.9x in March, compared to 2022s annual of 4.2x. Projected revenues for 2024 were also reassessed at a lower value all over the sector.

Part of the market-specific reason for this decline is the extreme instability of the US regional banks. Although the post-SVB collapse period saw a 2% outflow of deposits from medium-sized banks implying a net positive for fintech as an alternative to conventional banking the real effect is double-edged. Most fintech companies dont have a banking charter, so they use sweep accounts that automatically redistribute fintech deposits to a network of partner banks.

The issue lies in the fact that most members of this network are the same mid-sized banks with the same vulnerability to systemic banking crises. In late April, Cross River Bank one of the largest banking partners for fintech firms got an FDIC enforcement order over its lending practices.

As if it wasnt enough, 2023 neobanks are now facing a fearsome newcomer in the form of tech giant Apple Inc.AAPL . It was easy to grow the customer base by offering high-yield savings accounts as the onboarding tool when the national average rates were at the extremely low rate of 0.39%. Now, fintechs have to compete with a 4.15% rate, backed by the reputation of a globally recognized and respected brand. While the offering is currently limited to the US, there is no certainty that European markets wont be next.From Growth To Profitability: Strategizing For The Future

Investor sentiment has also undergone a shift. Now they demand profitability over revenue growth, and the fintech industry is well aware. This is seen from changes in financial performance, with Starling and Revolut already having hit annual profitability and Bunq reaching quarterly profits for Q4 2022. Those who face unavoidable losses resort to communication, like when the Danish bank Lunar raised additional capital in February with the goal of shortening the path to profitability, or when Monzo reported being on track to profitability by the end of 2023.

The combination of broader economic and financial situations, fintech valuations, and market-specific conditions of early 2023 represent a changing trend from growth to profitability. Investors no longer tolerate high burn rates for profitless growth. They want early traction and fiscal prudence.

Uncertainty in the banking system, as well as Apples daunting market entrance, favors abandoning extreme reliance on attracting deposits as well as a paradigm shift to diversification. What worked well for growth doesnt for profitability, a notion backed by a McKinsey estimate for Western Europe which claims that daily banking costs to serve are almost two times higher than the revenue per holder.A Shift To Super Apps

As for what the future holds, I believe more companies will be exploring new niches, especially SME banking and B2B services; as well as a realignment towards leveraging data to transform personalized super-apps. The resilience of the one-stop-shop model is demonstrated by Revolut, Wise, and recent M&A activity. Even in a bearish market, diversified companies with multi-vertical integration like Nuvei secure gigantic exit valuations.

One example of this new fintech strategy shift is WeBank: the Chinese behemoth leverages its user base for activities with more lucrative profit margins such as loans. The company also cuts costs by using machine learning and collected client data to calculate risk and create customer profiles, which in turn led to record low ratios of non-performing loans. The outcome was a 36% rise in revenue and a 39% jump in profit in 2021.

Expect to see more in the way of self-sufficient super-apps, as this is precisely the case study most fintech startups are eyeing right now.

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Politics

Starmer must delicately balance his risky EU reset as UK braces for Trump’s next move on tariffs

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Starmer must delicately balance his risky EU reset as UK braces for Trump's next move on tariffs

As Donald Trump kicks off his threatened trade war by slapping tariffs on both friends and foes alike, Number 10 is preparing for the moment he turns his attention to the UK.

The unpredictability of the returning president, emboldened by a second term, means the prime minister must plan for every possible scenario.

Under normal circumstances, the special relationship might be the basis for special treatment but the early signs suggest, maybe not.

Donald Trump and Keir Starmer.
Pic:Reuters
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Donald Trump and Keir Starmer. Pic: Reuters

It was never going to be an easy ride, with Sir Keir Starmer’s top team racking up years of insults against Trump when they were in opposition.

The bad feeling continued when Peter Mandelson was proposed as the UK’s new ambassador to the US – prompting speculation he might even be vetoed.

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Tariffs against Canada ‘will put US jobs at risk’

Amid all of this, the much-anticipated call between the two leaders seemed slow to take place, although it was cordial when POTUS finally picked up the phone last Sunday, with a trip to Washington to come “soon”.

It is against this slightly tense backdrop that the future of transatlantic trade will be decided, with Westminster braced for the impact of the president’s next move.

So, it’s unsurprising that as he waits, Sir Keir will spend the next few days resetting a different trading relationship – with Europe.

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Sky’s Ed Conway explains Donald Trump’s plan for tariffs

In this area, he is on slightly firmer ground, as the spectre of a global trade war makes European leaders want to huddle closer together to weather the storm.

And conversely, the Labour government’s track record works in their favour here, as they cash in their pro-EU credentials and wipe the slate clean after the bad-tempered Boris Johnson years.

Read more:
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Ursula von der Leyen and  Keir Starmer address the media in Brussels.
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Ursula von der Leyen and Keir Starmer address the media in Brussels in October. Pic: Reuters

It is still, however, an ambitious and risky endeavour to begin the delicate process of removing some of the most obstructive post-Brexit bureaucracy.

For minimal economic benefits on both sides, the UK must convince the Europeans that they are not letting Britain “have its cake and eat it”.

At the same time, Brexiteers back at home will cry betrayal at any hint that the UK is sneaking back into the bloc via the back door.

Donald Trump takes questions as he speaks to reporters.
Pic Reuters
Image:
Pic: Reuters

To make it even trickier, it must all be done with one eye on Washington, because while a united Europe may be necessary in the Trump era, the prime minister will not want to seem like he is picking sides so early on.

As with so many things in politics, it’s a delicate balancing act with the most serious of consequences, for a prime minister who is still to prove himself.

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Politics

Starmer ‘should be rediverting his plane’ to US to see Trump instead of flying to EU talks, says shadow business secretary

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Starmer 'should be rediverting his plane' to US to see Trump instead of flying to EU talks, says shadow business secretary

Sir Keir Starmer should be prioritising the UK’s relationship with the US rather than the EU, the shadow business secretary has said.

Andrew Griffith, a former Conservative minister, said the prime minister – who is heading to Brussels on Monday for talks with EU leaders – “should be rediverting his plane tomorrow” to Washington DC”.

Speaking on Sky’s Sunday Morning With Trevor Phillips, Mr Griffith said the UK economy needed “all the help it can get at the moment” as he criticised the tax increases in the chancellor’s budget and declining business confidence.

Overnight President Trump imposed tariffs on Mexico and Canada – prompting fears that he could do the same with the UK and jeopardise Rachel Reeves’ mission to grow the economy.

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Senior Tory denies Brexit a failure despite poll

Mr Trump declared an economic emergency in order to place duties of 25% on goods from Mexico and Canada, and 10% on all imports from China.

The tariffs also include a mechanism to escalate the rates if the countries retaliate – which Canada and Mexico did overnight.

In response to Canada’s retaliation, Mr Trump went further by threatening that the neighbouring country should become “our cherished 51st state”.

Analysis:
PM’s risky reset must balance Trump threat

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Tariffs will put US jobs at risk – Canadian PM

Mr Griffith told Sky News there was “a lot of jeopardy” for the UK “if the world goes into this era of increasing tariffs” and that necessitated moving closer to the US.

“The UK depends upon free trade, we don’t run particular trade deficits with the United States but, clearly, our economy needs all the help it can get at the moment after this government has come in, they’ve destroyed confidence, put up taxes, they’re proposing lots of extra red tape,” he said.

“So, the economy needs help and one of the big opportunities for the UK right now would be to get much closer to the US, our biggest trading partner.

“We have a trade deal with the European Union already, so, alongside that, a trade deal with the US would be a big win.”

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Ed Davey ‘advocates strongly’ for UK-EU customs union

The Labour government has long sought to reset the UK’s relationship with the EU in order to tackle problems such as small boat crossings in the Channel.

As well as travelling to Brussels on Monday, Sir Keir is also hosting German Chancellor Olaf Scholz at his Chequers country residence today.

Speaking to reporters at Chequers, Sir Keir said he had been “very clear” that while he does want a reset of the relationship between the UK and EU, “that does not involve a return to the EU”.

“We had a referendum here on that and that matter is settled, but I do want to see a close relationship on defence and security, on energy, on trade and our economy, and that is what we’re working on and I think that is certainly in the UK’s best interests,” he said.

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His words were echoed by Yvette Cooper, the home secretary, who said the UK wanted “stronger relationships with the US” and the European Union.

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Return to customs union ‘remains a red line’

She admitted that the tariffs Mr Trump has imposed against Canada, Mexico and China risked having a “really damaging impact” on the global economy.

“Well, tariff increases really right across the world can have a really damaging impact on global growth and trade, so I don’t think it’s what anybody wants to see,” she told the BBC’s Sunday With Laura Kuenssberg.

“The focus for Johnny Reynolds, our business and trade secretary, is on building trade links and better trading relationships, and removing barriers to trade, with the US, and also with other European countries and with countries right across the world.

“We want to reduce the barriers to trade, make it easier for businesses.”

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Environment

Cutting-edge Renault Filante concept hopes to break EV efficiency records

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Cutting-edge Renault Filante concept hopes to break EV efficiency records

The new Renault Filante Record 2025 concept is a racy, aerodynamically-sculpted piece of rolling electric lab equipment designed to push the envelope of energy efficiency and set new records for power consumption and range.

Built around the same 87 kWh li-ion battery as the Renault Scenic E-Tech electric car, the Renault Filante Record 2025 is a single-seat technology demonstrator that uses minimalist design engineering and lightweight, composite materials to bring its weight down to an impressive 1000 kg – a number made even more impressive when you realize that fully 600 kg of that mass comes from the battery!

“We designed this vehicle as a sculpture in motion. Inspired by fighter planes and the speed records of the nineteenth century,” says Sandeep Bhambra, Director of Advanced Design, Renault and Ampere. “(The concept) reflects both performance and timeless elegance. Every inch of the surface was crafted to capture the light and showcase the body lines, which appear to melt into the air. The blue windows and colour palette further underline this light and airy impression. The design as a whole seeks to convey an impression of flow and lightness.”

1926 Renault 40 CV des records

Record-setting 40 CV des records; via Renault.

Inspired by the 1926 Renault 40 CV des records, which set a number of speed records at the track in Montlhéry, France, between 1924 and 1926, the Renault Filante Record 2025 concept features a special new “Ultraviolet Blue” paint that flops between blue and purple, depending on the viewing angle. The paint serves to give the the impression of movement, even when it’s sitting still.

Renault says the final design was a collaborative effort between the stylists and aerodynamicists and meant to invoke the same sense of newness and speed as the now 100-year-old 40 CV des records. Adding to that “vibe” are bespoke, 3d-printed parts, unique friction-reducing prototype tires, and both steer-by-wire and brake-by-wire technologies that are expected to make their way into the next generation of Renault EVs.

The concept will be on display at this year’s Rétromobile motor show in Paris from February 5th through the 9th, before real-world test sessions and the hunt for a new efficiency record begins in earnest in Q2 of this year.

Electrek’s Take

Renault – and, by extension, the Renault Group – has been making steady progress on both the electrification and autonomous vehicle fronts for years, even logging several million miles on its deployed fleet of electric semi trucks. So while it’s easy to dismiss the claims made to hype up concept cars (which are, by definition, marketing exercises), it seems just as easy to underestimate Renault and its ability to drive at least parts of its concepts to production.

SOURCE | IMAGES: Renault, The Originals; via Electrive.

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