Fintech will Drive Some of the Largest Venture Capital Exits in the Next 5 Years, Steve Sloane from Menlo Ventures Predicts

Steve Sloane, a Principal at Menlo Ventures who focuses on investing in SaaS applications, marketplaces, and robotics, points out that Fintech has dominated the news cycle during 2020.

He notes that there were some large exits this year, including those involving Credit Karma, Personal Capital, and Plaid. The financial technology sector has continued to attract substantial venture capital investments this year, despite the COVID-19 outbreak.

Sloane argues that “the sheer size of the Fintech opportunity suggests that these exits are just the tip of the iceberg.”

He predicts:

“In the next five years, Fintech will drive some of the biggest VC exits.”

Sloan goes on to mention that US software companies secured $43.5 billion in capital in 2019 while $456 billion was spent on global enterprise software development. The Fintech sector managed to secure $17.6 billion in funding during this time period, meanwhile, revenue for the four largest US banks reached $461 billion. Sloan believes that these numbers indicate that Fintech is “not yet overinvested.”

He notes:

“Fintech companies addressing seemingly arcane parts of our economy are big businesses.”

He adds:

“It is not easy to disrupt incumbents. A combination of regulatory hurdles, entrenched behavior, low risk-tolerance, and the benefits of larger balance sheets have kept upstarts at bay for decades. However, as venture capital supports the ecosystem, modern technology creeps into the sector (cloud, APIs), connectivity and data exchanges improve, and consumers grow tired of incumbents, the tide continues to shift.”

Sloane continues:

“This shift and the challenge to the status quo by fintech upstarts will have lasting effects. Even when incumbents acquire their biggest disruptors, such as Visa’s acquisition of Plaid, innovations pioneered by those startups become integrated into the system and help move the industry forward. And it also leaves room for the next challenger to stake their claim.”

The global Fintech market is projected to reach a $300 billion market cap by 2025 due to large investments in new technology and infrastructure, a June 2020 report reveals.

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