FinTech Venture Funding Continues to Rise
It seems venture capital firms are still taking a shine to FinTech companies, funding them at record levels. According to a CB Insights, VCs invested $5.4 billion over 323 different FinTechs worldwide in the first quarter of the year. Moreover a dozen companies saw investments of over $100 million during the quarter, marking a mega-round record.
While the study looked at FinTech operations globally, it was the United States that saw the biggest increase in investments last quarter, reaching $2.17 billion in Q1. At the same time, funding from big banks like Goldman Sachs and JPMorgan Chase has decreased from top levels seen circa 2016. This decline has occurred over the past five quarters, although these players do still continue to invest in financial technologies.
In addition to continued growth in FinTech funding, there are also now more unicorns emerging as well. The CB Insights study found there are 26 FinTech unicorns worldwide, worth a combined value of $77.6 billion. Two of these unicorns were actually “birthed” in the first quarter of 2018 thanks to VC deals. Once again, the U.S. leads the way in this category, as it is home to the greatest number of unicorns. Some of these companies include Affirm, Coinbase, Credit Karma, Robinhood, and Stripe.
Another interesting finding in the CB report is that early-stage investments in FinTechs fell to a new low this quarter. However, at 55%, these types of investments sill make up the majority, followed by late-stage investments at 21%, “other” stage investments at 15%, and mid-stage investments at 10%. By comparison, early-stage funding was at 62% one year ago.
With $5.4 billion invested during the first quarter of 2018, the year is now on pace to top other recent years. In 2017 VCs invested a total of $16.5 billion across 1,165 FinTech deals globally while 1,049 deal resulted in $13.8 billion of investments the year prior. As far as single quarters, Q1 2018 was slightly behind Q3 2015 and Q2 2017 in terms of investment dollars, but the 323 deals made marked a new record.
Finally CB notes that there seems to still be a market for alternative lenders, even as some public FinTechs like Lending Club and OnDeck continue to struggle on Wall Street. In particular they point to Upgrade — started by former Lending Club CEO Renaud Laplanche — which raised a $60 million in Series A from investors such as Union Square Ventures, VY Capital, CreditEase, and Ribbit Capital one year ago. That company says it expects to originate $2 billion in loans this year and is apparently valued at $180 million.
Overall the latest CB Insights Global FinTech Report is filled with good news for the industry. On top of the record number of deals, increasing mega-deals, and a number of unicorns coming to life, it’s also encouraging to see how many American companies are making an impact in the space. So while certain FinTech firms may not have made a major impact on the stock market just yet, these latest numbers show that VCs and other investors are far from giving up on new financial technologies.