Lending Briefing: The digital lending fintechs attracting capital in a down market
- Funding is down across the fintech sectors compared to last year, with less capital going to big segments like payments, baking, and lending.
- We are taking a look at some of the digital lending fintechs that still secured financing in this past quarter, in spite of the down market.
In a down market, who's still attracting capital?
Fintech funding is down considerably – the numbers have started to come in, and they’re pretty bad.
Globally, fintech startups raised $21.5 billion in Q2 2022, 32% less than a year ago according to Dealroom. They reported that the banking, insurtech, mortgages and lending sectors were the most affected, with funding at half of last year’s.
Similar figures can be found at CB Insights, which revealed that fintech funding is at its lowest level since 2020 on a quarterly basis. Some of the most active fintech investors are more reserved this year, with top VC firms Sequoia and Tiger Global participating in 36% fewer investments in Q2 compared to the prior quarter.
Some of last year’s fintech darlings are now struggling, with investments in the neo brokers/trading and BNPL sectors down almost 80% in Q2 2022 versus last year’s average.
But at the other end of the spectrum, revenue-based financing is gaining momentum, attracting nearly half a billion dollars from VCs this past quarter, according to Dealroom. Most of this was from UK fintech Bloom raising $300 million in a Series A, which will fuel its vision to become ‘Europe’s leading provider of capital to digital entrepreneurs’. A similar initiative in India, GetVantage, also secured financing.
Who’s getting capital?
Looking at sectors, banking and lending tech attracted the most capital, followed very closely by crypto. The US was still the largest and most active region with regards to the number of financings and deal volumes, followed by the UK and India, according to FT Partners.
But who is still getting capital from investors now that last year’s frenzy has been firmly put to rest? In the digital lending space, some of the quarter’s largest deals happened in the US, naturally, and we’re taking a quick peek to see what investors continued to place their bets on.
Home equity – Point
- Real estate fintech platform offering financing solutions for homeowners and homebuyers
- Allows homeowners to sell equity in their homes, getting a lump sum payment in exchange for a share in the future appreciation of the home
- Raised $115 million in a Series C funding round led by WestCap Group
Auto lending/refinancing – Caribou
- Aims to help people with their auto loans, refinancing over $1.5 billion in debt
- Closed a $115 million Series C round that brought its valuation to $1.1 billion, hitting unicorn status
- The company grew from 40 employees pre-pandemic to nearly 500 employees this year
Commercial real estate financing marketplace – Lev
- Lev wants to build an end-to-end digital commercial real estate financing marketplace, enabling more efficient transactions
- The platform originated nearly $1 billion in loans last year, ten times more than in 2020, according to reports
- Raised $70 million in a Series B, bringing its total equity funding to $110 million, led by Cross River Digital Ventures and Parker89
Outside of the US, India was quite present in the top ten with Kissht and Leap Finance securing $80 million and $75 million, respectively.
Brazil’s favorite solar panel financing fintech Solfacil also secured another $100 million in a Series C led by QED Investors, after getting an $160 million capital injection less than a year ago.
Quote of the week
“We’re going to see that banks are more open to real life cash flow underwriting, as opposed to spreading last year’s financials and expecting next year to be the same. Seems like next year has not been the same for a couple years now. Maybe we should just accept that.”
- Dan O’Malley, CEO of Numerated
What we’re reading
Banks used to provide relief from inflation. Now they profit big
As fintechs stumble, traditional banks will try to win back SMBs
PayPal, king of the small business lenders?
Why a tiny credit union sued Apple over unfair tap-to-pay rule
Citigroup enlists black-owned banks in rare $1.2 billion loan deal
What we’re writing
- The reversal of Roe v. Wade: Its impact on economic growth, financial wellbeing, and the financial services industry
- Marcus by Goldman Sachs’ CFO, Liz Ewing, on consumer finance amid rising inflation
- What’s the secret sauce of a successful bank/fintech partnership?
- Data Snack: Credit and debit cards are king; BNPL’s ‘dangerous illusion’ is fueling overspending