In late 2021, B2B fintech infrastructure companies raising Series A rounds in the UK and Europe were regularly achieving revenue multiples that reflected assumptions about growth trajectories that, in hindsight, were informed more by market momentum than by the unit economics of the specific businesses. Companies with three to four million pounds of annual recurring revenue were raising at pre-money valuations that implied either exceptional near-term growth or a permanent re-rating of infrastructure software as an asset class. By the middle of 2022, both assumptions had been revised. The public market correction in high-growth software from late 2021 onward, combined with rising interest rates that changed the discounting of terminal value, compressed those multiples significantly across the board.
We do not view this as a problem. The valuation environment of 2021 was, from our perspective, principally a headache — it made it harder to be disciplined about the prices we paid for investments we believed in deeply, and it created incentives for founders to optimise for valuation at seed that then created price expectations at Series A that were difficult to sustain. A market in which a B2B payments infrastructure company with clear product-market fit, a defensible technical moat, and eighteen months of ARR growth raises its Series A at a revenue multiple that reflects the actual business quality rather than a market fever is, for us, a more navigable environment. We can underwrite the business we are buying rather than the multiple we hope to sell into.
The correction has had a specific effect on which businesses are raising at Series A and which are not. In 2021, the investor appetite for B2B fintech was sufficiently broad that companies with compelling narratives but limited traction were able to raise at Series A by leaning on market size arguments and impressive founding teams. In 2022, the emphasis has shifted decisively toward demonstrable enterprise customer relationships, clear net revenue retention data, and evidence that the unit economics of adding a new customer are sustainable. For the infrastructure layer specifically — where sales cycles are long, integration complexity is high, and early revenue is often below what the eventual contract value will be — this means that companies need to come to Series A with evidence of customer commitment, not just early pilots.
There is a specific challenge for B2B fintech infrastructure companies in demonstrating Series A readiness under tighter market conditions: the natural enterprise sales motion involves long evaluation periods, legal review of API access agreements, and procurement cycles that can extend to twelve months from initial conversation to live revenue. A company that started serious enterprise sales conversations in late 2020 may only be generating significant revenue in 2022, not because the business is progressing slowly, but because that is the realistic timeline for enterprise fintech adoption. Investors who penalise these companies for not having cleaner revenue curves are applying a consumer SaaS model to a fundamentally different commercial environment. We have found that the most insightful Series A discussions focus on leading indicators — pipeline quality, integration depth, expansion revenue from existing customers — rather than trailing revenue alone.
Our position for our own portfolio companies is to focus 2022 on deepening existing customer relationships and demonstrating expansion revenue rather than optimising for new logo count. A payment infrastructure company that grows from £500K to £1.5M of ARR by going deeper with five enterprise customers is, in our view, in a stronger position for a Series A in 2023 than one that grows to the same number by adding twenty small customers with uncertain retention. Investor appetite for the former type of growth is stronger in the current environment, and the business quality it reflects is genuinely higher. The compression of 2022 is clarifying, not just for valuations, but for which business-building strategies actually compound.