Venture capital frequently is a leading indicator of where things are headed in financial services markets. Research from Crunchbase examines venture investments over the last 10 years. The data firm explores what sectors were the benefits of rising amounts of and which countries were the recipients of these inflows.
For example, Crunchbase’s data shows that more funding money is flowing into financial services companies, making up 16% of total venture dollars in 2019. Liquidity remains a top concern for many fintechs, with 177 fintech companies acquired for a total of $6.1 billion in the same year.
Financial services grows as a proportion of overall venture funding
- In 2010, financial services represented 10 percent of total venture funding. In 2019, that figure went up to 16 percent.
- Investments in financial services companies have grown more than ninefold since 2010 and more than doubled since 2015.
- The largest funding round to a fintech company was raised by Ant Financial—a $14 billion Series C round in 2018.
The COVID-19 crisis will definitely put a crimp into future fundraising, as well as short term performance of fintech firms in the market.
“Our B2B companies will need to prepare for longer sales cycles and shrinking budgets," said Satya Patel founder of seed investor Homebrew.
"Our B2C companies will need to adjust to reductions in consumer spending and greater emphasis on short term cash needs The hardest hit fintech
businesses will be lending businesses that have large outstanding loan balances and that will have to deal with lots of uncertain credit risk. In general, an increasing emphasis on unit economics over growth, will put some companies in a very difficult fundraising position.”
2019 was the second-highest investment year over the last decade with $43 billion invested in fintech.
2018 was an all-time high for investment in financial services at $57 billion, with the largest growth percent YOY in late-stage venture.
- Fintech companies have attracted a greater proportion of late-stage venture funding rounds in the last two years. Seed and early-stage investments in fintech were at 34 percent in 2019 and 32 percent in 2018. Seed and early-stage venture represent a higher proportion of investment dollars, averaging 51 percent from 2010 to 2017.
- As of February 2020, YOY deal counts are down by 22 percent. Much of the difference in funding round counts are attributed to the seed stage rounds -- down 31 percent.
Fintech investments across geographies
- In 2019, fintech companies raised $16 billion across 1,057 companies in the U.S., $5.2 billion across 342 companies in the U.K., $4.6 billion across 199 companies in India, and $3.7 billion across 147 companies in China.
- Germany rounds out the top five with $1.7 billion raised across 83 companies. 106 companies raised $800 million in Singapore.
- With the upswing in investments over the last two years in financial services, Crunchbase looked at growth by country year-over-year. Fourteen of the top 17 top countries grew in investment dollars YOY.
- For two of the largest markets in fintech, the U.S. was up by 8 percent YOY, and China was down 86 percent YOY -- though invested dollars over a two-year span were fairly close.
The most active fintech investors
With its dedicated fintech practice, Andreessen Horowitz added the most fintech portfolio companies in 2018 and 2019. It was followed by Ribbit Capital. Both are based in Silicon Valley. Third was Anthemis Group, based in London, UK, and fourth was Digital Currency Group, focused on blockchain and based in New York.
- At the seed stage, Techstars, Y Combinator and 500 Startups invested in the most fintech companies over 2018 and 2019.
- The top accelerator programs in terms of the number of fintech portfolio companies they've invested in are Global Founders Capital, Seedcamp and SV Angel.
- The most active venture and private equity investors are geographically diverse and represent a mix of leading venture firms, fintech-focused investors, corporate venture, and late-stage alternative investors.
Liquidity remains a top concern
In 2019, 177 fintech companies were acquired for a total of $6.1 billion. In contrast, 2018 had 193 acquisitions totaling $12 billion. (This only includes venture-backed companies and excludes companies who have previously gone public.)
In banking, the largest fundings went to Chime, Berlin-based N26, and
Brazil-based Nubank. For lending, the largest funding rounds were for UK-based Greensill Capital and OakNorth, U.S.-based Affirm, and Australia-based Judo Bank.
In payments, Marqeta, a payment card platform for commerce companies, raised a $260 million Series E led by Coatue Management valuing the company at close to $2 billion.
Payment technology platform Stripe raised a $100 million Series E and separately a $250 million dollar Series F round in 2019. Investors in the Series F include Andreessen Horowitz, Sequoia Capital, and General Catalyst valuing the company at $35 billion.