The valuation of Pleo, a Denmark-based expenses management platform unicorn, has seen a significant reduction by one of its key investors, Kinnevik. This adjustment underscores the evolving dynamics in the fintech sector, where external factors such as market conditions and internal operational strategies are influencing company valuations. The reduction follows a broader trend of recalibration in startup valuations amidst economic uncertainties, despite Pleo’s position as a major player in the European fintech landscape.
Kinnevik, which holds a 14% stake in Pleo, reported that the value of its investment dropped from SEK 3293 million ($298 million) in Q4 2023 to SEK 2445 million ($227 million) in Q4 2024. This 26% year-on-year decline reflects an implied valuation of approximately $1.62 billion for Pleo, compared to its $2.13 billion valuation a year earlier. Moreover, the Swedish investment firm reduced Pleo’s valuation by 10% quarter-on-quarter between Q3 and Q4 2024, further highlighting the pressures facing high-growth startups.
Why did Pleo’s valuation decrease?
The valuation drop comes despite Kinnevik’s acknowledgment that Pleo outperformed SaaS benchmarks by growing two to three times faster, while maintaining above-average gross margins in 2024. However, profitability improvements have been offset by the company’s planned investment in product and market expansion for 2025, which the investor predicts will stall margin improvements in the short term. Kinnevik emphasized:
“Profitability improvement measures over the past years have shown good results, and in 2025 Pleo plans to accelerate investment in product and market expansion. This leads to stalling margin improvements in 2025, but is expected to create a larger and stronger business in 2026 and beyond.”
How does this compare to Pleo’s earlier performance?
Pleo achieved rapid success by becoming a unicorn in 2021, just six years after its founding in 2015. The company raised $150 million at a $1.7 billion valuation in 2021, followed by a $200 million funding round six months later, which raised its valuation to $4.7 billion. These achievements positioned Pleo as one of Europe’s most valuable fintech startups. However, the current valuation of $1.62 billion marks a stark contrast, reflecting ongoing challenges in the broader startup ecosystem.
Unlike Pleo, Kinnevik increased the valuation of its stake in TravelPerk, a business travel management platform, by 66% year-on-year, with the latter now valued at $2.26 billion. This divergence highlights the varying paths of fintech companies adapting to changing market conditions. Additionally, Pleo’s recent foray into the treasury space with a suite of tools suggests efforts to diversify its offerings and sustain growth.
Pleo’s prior trajectory illustrated the significant potential of fintech startups to capture market share and attract funding. However, with its valuation now recalibrated, comparisons with earlier reports show that external economic factors, along with internal strategic decisions, play a crucial role in shaping investor confidence. This pattern is not unique to Pleo, as the fintech sector as a whole has faced mounting pressures over the past year.
Moving forward, Pleo’s success will likely depend on how effectively it balances profitability improvements with its investment in new products and markets. While its focus on spend management tools and credit products remains strong, the company’s ability to sustain high growth and deliver shareholder value will be closely scrutinized. For businesses and consumers relying on Pleo’s products, the company’s strategic direction in the coming years will determine its role in the competitive fintech industry.
