The transformation of analog finance to digital finance is ongoing but the onset of the global health crisis of COVID-19 has accelerated digital transformation for all. For Fintech, this has meant a boom in digital (neo) banking, investing platforms, and a host of other financial services. This growth has been fueled by private capital cascading into Fintech startups and later-stage firms. The 3rd quarter of 2021 is emblematic of Fintech growth as venture capital booked its largest quarter of funding for this sector – ever, according to research provided by Pitchbook.
In total, $33.7 billion was booked for Fintech deals in Q3. This represents a quarter of quarter growth of 10.7% and a year over year rise of a whopping 195.6%.
According to Pitchbook, 1,217 deals took place during the quarter rising 3.8% from Q2 and 66.3% more than the same period last year.
The report states that “aggregate transaction volume for the first three quarters of this year stands at $88.3 billion, which is almost double of 2020’s full-year total of $44.9 billion” and estimated deals of 3589 for the year (versus 3,111 in 2020).
The top segments of Fintech include payments at $10 billion – a 33.8% increase quarter over quarter. “Consumer finance,” think digital banks and neobanks, had a gangbusters quarter too.
Fintech VC exit activity hit all-time highs of 275 deals and $244.5 billion in value. In 2020, these metrics were $35.8 billion for 214 deals. Most of the exits were via a merger or acquisition, followed by an initial public offering.
According to the report, the top ten key VC exits during Q3 2021 are as follows:
- Robinhood Markets – $30,021.1 (millions) – NASDAQ
- Toast – $19,103.7 – NYSE
- LendInvest – $299.1 – LSE
- Blend – $3,592.7 – NYSE
- Wise – $12,200.3 – LSE
- Remitly – $6,638.2 – NASDAQ
- Paidy – $2,700.0 – Aquired by PayPal
- MoneyLion – $1,800.0 – SPAC – Fusion Acquisition
- Invoice2go – $625.0 – Acquistion by Bill.com
- PayCertify – $750.0 – Acquistion by ProfitPay
The average seed deal during 2021 were reported at $2 million with early stage venture capital at $7.5 million.
Pre-money valuations for Fintechs in 2021; $8 million – seed, $40 million – early stage VC.
So what is around the corner for 2022 and beyond. Pitchbook believes that Autonomous finance solutions for financial planning and analysis (FP&A automation), Real Time Payments, and Crypto Custodians are the “emerging opportunities.”