In December 2024 our Managing Member, Adam T. Hark, shared his end-of-year letter expressing his gratitude and offering a few predictions for 2025. Now, halfway through the year, we are reopening the conversation to see how his predictions are playing out, and even expanding the watchlist.
Prediction 1:
“Artificial intelligence is here and its nascent contributions to fintech, payments and software will continue to be as disruptive as they are reformative, forever changing our previous conceptions of the productivity curve.”
There’s no doubt that AI has and will continue to disrupt the fintech, payments and software space. It’s safe to say that this prediction reads the room. If this prediction missed, it did so to the down-side: AI’s disruptive power has far exceeded anything contemplated just 6-months ago.
Prediction 2:
“As the bid/ask gap continues to close, 2025 should be a year when the public markets finally unlock, liberating high growth privates to lucrative exits…”
Already, we have seen four fintechs that have borne out this prediction: eToro, Chime, WeBull and Circle. Each has exited successfully into the public market through IPO. As we turn toward H2, with markets at all-time-highs, there’s no reason (today) to think that other backlogged fintechs will be filing their S1s shortly.
Prediction 3:
“…especially with legacy payments and software firms, take-privates will continue as shareholders seek higher valuations in private equity.”
We’re going to give our Managing Member a “more right than wrong” on this one. Though there have already been some clear examples – including Thoma Bravo’s recent take-private of hospitality software and payments provider Olo – a number of other publicly traded payments companies have all but suggested that take-private transactions are very much a part of their strategic outlook, not the least of which including RePay, Payoneer, and PaySafe.
Prediction 4:
“Late 2024 also indicated an acceleration of liquidations from venture firms, offloading underperforming portfolio holdings, many of which being discounted technology assets ripe for the opportunistic and strategic-minded buyer.”
Though we can’t support this one due to a lack of publicly available information (meaning deals are not announced), we can (Wellesley Hills Financial can) 100% confirm this process is very much in full motion. 2025 has been a “gut check” year for venture capital firms, where GPs are pressing to “rationalize” their portfolios: monetize under performers (by VC standards) and reinvest into the new.
What’s in the 2025 H2 crystal ball?
Prediction 1: The market is rife with quality startups in payments, fintech and B2B SaaS that not just 3-years ago would have been eligible for raising, but with limited runway and pathways to profitability extending beyond 18 months, have no other choice but to seek exit or growth through M&A activity. We look for M&A in the lower-middle and micro markets to remain very active.
Prediction 2: Companies eligible for non-dilutive debt financing – private credit – should get a lot of looks, especially recurring revenue business models. Why? There’s simply too much non-bank capital on the sidelines. Private credit funds now find themselves in fierce competition with one another over limited quality dealflow. The consequence of this is forcing the same to get more creative and flexible with their credit boxes, and a downward pressure on spreads. We don’t predict a washout in private credit, but we do predict a normalization in both the nominal dollars available to invest and the number of funds in operation.
Prediction 3 The equity markets are so frothy, don’t be surprised to see the return of SPAC deals as well.
