Financial Technology Sector Overview – Q4 2017

As we’ve examined in our previous analyses, the overall funding trends in Financial Technology (fintech) are stable and its exit activity is seeing robust growth, indicating that the sector is maturing as a whole. Yet what are the different components of fintech and how do they make up this startup ecosystem? On our fintech research platform, we have classified the companies in the sector into functional categories. This blog post aims to examine these categories and how they compare with one another through a series of graphics.

Payments-Related Companies Form the Largest Fintech Category

Let’s start off by looking at the Logo Map for the fintech sector. As of January 2018, we have classified 2,285 fintech startups into 16 categories which collectively raised $80 billion in funding. The Logo Map highlights the number of companies in each category and a random sampling of these companies. Please note that, for the sake of brevity, certain related categories have been combined into the same box on the Logo Map. Examples include combining Business Lending and Consumer Lending into Lending, and combining Consumer Payments, Payments Backend, and Point of Sale Payments into Payments.

Financial Technology Logo Map
Financial Technology Logo Map

We have seen what the different categories in fintech are and how many companies are within each category. What about their funding and maturity in relation to one another? Let’s look at our Innovation Quadrant to find out.

Most of the Fintech Categories Are Pioneers

Our Innovation Quadrant for the fintech sector divides the categories within the sector into four different quadrants according to their average funding and average age. The Heavyweights are the categories with companies that have reached maturity with significant financing. The Established are those that have reached maturity with less financing. The Disruptors are less mature but with significant financing. The Pioneers are less mature and with earlier stages of financing.

Financial Technology Innovation Quadrant
Financial Technology Innovation Quadrant

We can see from our Innovation Quadrant above that most of the categories within fintech belong in the Pioneers quadrant. The Point of Sale Payments, Business Lending, Consumer Payments, and Consumer Lending categories have raised more funding and are in the Disruptor quadrant. Infrastructure and Transaction Security are the most mature categories with less funding. Payments Backend is in the Heavyweights quadrant for having reached maturity with significant financing.

We’ve now seen how the fintech sector is categorized and the relative stages of innovation for those categories. How do these categories stack up against one another in a holistic view? Let’s look at the Total Funding and Company Count Graph for Fintech.

Consumer Lending Is the Leading Fintech Category

The graph below shows the total amount of venture funding and company count in each fintech category.

Financial Technology Total Funding and Company Count by Category
Financial Technology Total Funding and Company Count by Category

We can see from the graph above that the Consumer Lending category leads all the other fintech categories by a substantial margin, with a total funding of $24 billion and 302 companies. This category is comprised of companies that offer new ways for consumers to obtain personal loans and have their credit risk assessed. Some example companies in this category include SoFi, Avant, CommonBond, and Affirm.

Conclusion: Lending and Payments-Related Categories Dominate Fintech

The graphics above indicate that the Consumer Lending category stands out against other fintech categories in terms of funding and company count. Moreover, other lending and payments-related categories have also acquired significant financing. It will be interesting to see how this sector turns out in 2018.

What are your thoughts on this? Let us know in the comments section below.

To learn more about our complete Financial Technology report and research platform, visit us at www.venturescanner.com or contact us at info@venturescanner.com.

Fintech Exit Activity Sees Robust Growth

The Financial Technology (fintech) sector has seen a lot of exit activity over the past few years. How does the number of exit events trend over time? Based on our fintech research platform, we have analyzed the data through 2017 and can conclude that fintech exit activity is seeing continued robust growth.

This observation was derived from two takeaways:

  • Fintech exit events are demonstrating strong annual growth
  • Fintech exit events are increasing at the quarterly level as well

We’ll illustrate these takeaways with two graphics that show the solid growth of fintech exit activity over time.

Fintech Exit Events Showing Strong Annual Growth

We’ll start off by examining the fintech exit events from 2011 to 2017. Exit events include both acquisitions and Initial Public Offerings (IPOs). The below graph shows the number of annual fintech exit events stacked by quarters.

Fintech Exits by Quarter - Stacked
Fintech Exits by Quarter – Stacked

This graph illustrates that fintech exit activity is demonstrating strong growth year over year. In fact, the Compound Annual Growth Rate (CAGR) in exit activity grew by 49% from 2012 to 2017. In addition, the number of exit events in 2017 is the highest ever and amounts to a 133% growth year over year.

Let’s now see if this trend holds at a quarterly level.

Fintech Exit Events Increasing At the Quarterly Level

Below is a graph of the number of fintech exit events by quarter.

Fintech Exits by Quarter - Cluster
Fintech Exits by Quarter – Cluster

The above graph shows that the overall fintech exit activity is on an upward trend at the quarterly level. Generally speaking, each quarter in 2017 saw a larger number of exits than in 2016. The number of exit events in Q4 2017 is 106% of that in Q4 2016. Q1 2017 was a particular outlier, seeing a huge 189% increase over Q1 2016. The only exception is Q2 2017 which fell slightly from Q2 2016.

From these two graphics we have now seen that fintech exit activity experienced vigorous growth at both the annual and quarterly levels.

Conclusion: Fintech Exit Activity Is Seeing Robust Growth

In summary, we have seen that the number of fintech exit events is showing strong growth year over year. Moreover, these exit events are increasing at the quarterly level as well.

We can conclude from these takeaways that fintech exit activity is seeing continued robust growth–which corresponds with our conclusion from the fintech funding blog post that the fintech sector is maturing as a whole. It’ll be interesting to see if this trend continues into 2018.

What are your thoughts on this? Let us know in the comments section below.

To learn more about our complete Financial Technology report and research platform, visit us at www.venturescanner.com or contact us at info@venturescanner.com.

Fintech Sector Maturing in 2017

Financial Technology (fintech) has seen a lot of venture capital funding over the past few years. How have its funding trends evolved over time? Through the insights derived from our fintech research platform, we conclude that the fintech sector is maturing.

We have come to this conclusion from the following four takeaways:

  • Overall fintech funding trends are stable
  • Fintech investor interest is constant
  • Fintech funding has shifted to mid- and late-stage event
  • The average fintech funding size is growing

We will illustrate these takeaways with a series of graphics to show that the sector is maturing.

Fintech Funding Relatively Stable in 2017

We will start off by examining the fintech funding trends over the years. Let’s look at the annual fintech funding amount stacked by quarter.

Fintech Funding Amount by Quarter
Fintech Funding Amount by Quarter

As we can see from the graphic, fintech funding in the first three quarters of 2017 is slightly down relative to 2016. In fact, it’s 92% of the funding in Q1-Q3 2016. Therefore we expect to finish off the year more or less on par with last year.

We have seen that funding trends are steady, but what about investor appetite?

Fintech Investor Interest Remains Constant in 2017

Let’s now look at the number of fintech investors who participated in each investment to see how investor activity has evolved over time.

Fintech Investor Activity by Quarter
Fintech Investor Activity by Quarter

The above graphic shows that fintech investor participation in the first three quarters of 2017 is slightly higher than 2016. It grew by 2% from the investor participation in Q1-Q3 2016. This implies the sector will end the year slightly up or flat year-over-year in fintech investor participation from 2016 to 2017.

We have seen that overall funding amounts and investor activity have remained generally flat, but what about the stages of investment?

Fintech Funding Shifted to Mid- and Late-Stage Events

Let’s now take a deep dive and analyze fintech investors’ behavior in detail. Below are the Fintech Funding Amount by Round and Funding Event Count by Round graphics. The first graphic shows the total amount of funding that went into a specific funding round (such as Seed or Series A), while the second graphic shows the total number of funding events for a specific round.

Fintech Funding Amount by Round in Recent Quarters
Fintech Funding Amount by Round in Recent Quarters

The analysis above shows that Seed funding saw a 56% drop and Series A saw a 45% drop from Q2 2017 to Q3 2017. However, fintech funding amounts for later stage events grew from the previous quarter. Series B funding amount grew by 200% and Series C grew by 40%.

Based on the above, we can conclude that fintech funding has shifted from early-stage to mid- and late-stage funding. Let’s see if the Funding Event Count by Round graphic reinforces this conclusion.

Fintech Funding Count by Round in Recent Quarters
Fintech Funding Count by Round in Recent Quarters

We see that Seed and Series A rounds both saw a significant drop in funding events over the past quarter as well. Seed round events saw a 49% drop and Series A events saw a 25% drop from Q2 2017 to Q3 2017. In fact, the decline in Seed and Series A funding events appears to be a trend over the past few quarters.

On the other hand, Series B and later stage funding events have seen growth. Series B events grew by 82% and Series C events grew by 45% from Q2 2017 to Q3 2017.

The above data indicates that fintech investment has moved to later-stage ventures.

Fintech funding and investor activity have plateaued and the funding has shifted to mid- and late-stage. What about each individual investment deal size?

Average Fintech Funding Deal Size Growing in 2017

If the shift of fintech funding from early-stage to later-stage events indicates that the sector is maturing, we would also expect the average deal size to be growing. This is because as a sector matures, the winners would need larger capital infusions to scale.

Fintech Average Funding Event Size Over Time
Fintech Average Funding Event Size Over Time

This graphic does in fact indicate that the average fintech funding amounts have grown significantly over the past few years. The trendline shows that from Q3 2011 to Q3 2017 the average deal size has grown by approximately 700%. This consistent upward trend in average deal size indicates that the fintech sector is indeed maturing.

Conclusion: Fintech Sector Now Maturing

In summary, we’ve seen that the overall fintech funding and investor interest has remained steady. At the same time, the funding has shifted from early-stage events to later-stage events. Moreover, the average fintech funding amount has grown consistently year-over-year. These takeaways lead us to conclude that the fintech sector is indeed maturing. It’ll be interesting to see if this trend continues into 2018.

What are your thoughts on this? Let us know in the comments section below.

To learn more about our complete Financial Technology research platform, visit us at www.venturescanner.com or contact us at info@venturescanner.com.

Financial Technology Activity by Selected Investors – Q3 2017

The following graph summarizes investor activity in the Financial Technology (Fintech) space. Please note these graphics are made using data through July 2017.

Financial Technology Activity by Selected Investors
Financial Technology Activity by Selected Investors

The above analysis summarizes the total number of investment rounds Fintech investors participated in, and the number of unique companies funded by those investors. Major investors into the space include Accel Partners, Sequoia Capital, YC, 500 Startups, and Index Ventures.

We are currently tracking 2336 Financial Technology companies in 16 categories across 64 countries, with a total of $79.3 Billion in funding. Click here to learn more about the full Financial Technology market report.

Financial Technology Exits by Category and by Year – Q3 2017

The following two graphs show exit activity in the Financial Technology sector. The graphics include data through July 2017.

Financial Technology Exit Activity by Category
Financial Technology Exit Activity by Category

The above graph summarizes the number of exits (acquisitions and IPOs) in each Financial Technology category. The Payments Backend category is leading the sector with 39 acquisitions and 8 IPOs. The Personal Finance category follows behind with 35 acquisitions and 2 IPOs.

Financial Technology Exit Activity by Year
Financial Technology Exit Activity by Year

The above graph summarizes the number of exits (acquisitions and IPOs) in Financial Technology by year. 2016 leads the sector with 56 acquisitions and 7 IPOs. 2017 follows behind with 48 acquisitions and 1 IPO.

We are currently tracking 2330 Financial Technology companies in 16 categories across 64 countries, with a total of $78 Billion in funding. Click here to see the full Financial Technology market report.

Venture Investing in Financial Technology – Q3 2017

The following graphs highlight venture investing trends into the Financial Technology sector. The graphics include data through July 2017.

Financial Technology Venture Investing by Category
Financial Technology Venture Investing by Category

The above graph compares the total venture funding in each Fintech category to the number of companies in the category. The Consumer Lending category leads both metrics, with around $22B in funding and about 300 startups.

Financial Technology Average Funding by Category
Financial Technology Average Funding by Category

The above analysis summarizes the average company funding in each Fintech category. The Consumer Lending category leads the sector with around $104M in average funding per company, followed by the Consumer Payments category with around $100M in average funding per company.

We are currently tracking 2323 Fintech companies in 16 categories across 64 countries, with a total of $77.6B in funding. Click here to learn more about the full Financial Technology market report.

Age by Category in Financial Technology – Q3 2017

The following graph shows average and median age in the Financial Technology sector. The graphic includes data through July 2017.

financial-technology-age-by-category
Age by Category in Financial Technology

The above graph summarizes the average and median age of companies in each Financial Technology category. The Payments Backend category has the highest average age at around 10 years, and the Banking Infrastructure category is the runner-up with an average age of around 9 years. Both the Payments Backend and Banking Infrastructure categories have the highest median age at around 8.5 years. On the other hand, Retail Investing is the youngest Financial Technology category with an average age of around 6 years and a median age of around 5.5 years.

We are currently tracking 2307 Financial Technology companies in 16 categories across 64 countries, with a total of $75.4B in funding. Click here to learn more about the full Financial Technology market report.