How is the funding environment shaping up for financial technology in 2019? As we pass the mid-year mark, let’s see how the year-to-date metrics compare to the historical trends. The graph below shows fintech total funding by year, stacked by quarters.
As the graphic demonstrates, fintech has amassed $18.8B through Q1 and Q2 of this year. This amount represents 45% of the total funding in 2018, and 71% of the funding through Q2 in 2018. The top three funding events in Q2 2019 include a $1B round into Figure, a $700M round into Kabbage, and a $500M round into SoFi.
A straight-line projection of the completed funding this year would result in $37.6B, which is 89% of the total 2018 funding. By the same token, a weighted quarterly average projection of 2019 funding would result in $30B, which falls short of the total 2018 funding by 29%. Therefore, based on the mid-year data, fintech funding in 2019 is projected to decline from the funding in 2018.
How has investor appetite in financial technology evolved throughout the years? In this blog post we examine the total investments by year into this sector to help answer that question. The graph below shows the total number of investors in all deals stacked by quarters.
As the graphic demonstrates, investor activity in fintech has remained relatively stable in recent years. The 5-Year CAGR of fintech investor activity from 2013 to 2018 is 13%. In addition, the sector has seen a total of 996 investors in all deals through Q2 of this year. This represents 49% of the total investor activity in 2018, and 92% of the investor activity through Q2 in 2018. Taking all these data points together, we can see that investor appetite for fintech deals has stayed consistent in recent years.
How has the exit activity for financial technology developed in the first half of 2019? This blog post explores fintech exit metrics through Q2 2019 and compares them to previous years. The graph below shows the number of fintech exits by year, stacked by quarters.
As the graphic demonstrates, fintech has seen a total of 43 exit events through Q2 of this year. This represents 47% of the total exits in 2018, and 110% of the exits through Q2 in 2018. Some of the exit events in Q2 2019 include Wave’s acquisition by H&R Block, Cheddar’s acquisition by Altice USA, and Lakala’s IPO.
A straight-line projection of the completed exit activity this year would come out to 86 exit events, which falls short of the total exits in 2018 by 5%. On the other hand, a weighted quarterly average projection of 2019 exit activity would come out to 100 exit events, which exceeds the total exits in 2018 by 10%. Therefore, based on the mid-year data, fintech exit activity in 2019 is projected to be approximately on par with the exit activity in 2018.
This blog post examines the different components of the financial technology (fintech) ecosystem. We will illustrate what the categories of innovation are and which categories have the most companies. We will also compare the categories in terms of their funding and maturity.
Consumer Lending Is The Largest Financial Technology Category
Let’s start off by looking at the Sector Map. We have classified 2,665 fintech startups into 16 categories. They have raised $142B from 3,996 investors. The Sector Map highlights the number of companies in each category. It also shows a random sampling of companies in each category.
We see that Consumer Lending is the largest category with 358 companies. These companies offer new ways for consumers to obtain personal loans and have their credit risks assessed. They include peer-to-peer lending, micro-financing, big data analytics, and consumer credit scoring services. Some example companies are SoFi, CommonBond, Avant, and Lufax.
Let’s now look at our Innovation Quadrant to find out the funding and maturity of these categories in relation to one another.
The Pioneers Quadrant Has the Most Financial Technology Categories
Our Innovation Quadrant divides the fintech categories into four different quadrants.
We see that the Pioneers quadrant has the most number of fintech categories at 11, accounting for 69% of all fintech categories. The Payments Backend category has the highest average age, and the Consumer Payments category has the highest average funding. On the other hand, the Crowdfunding and Equity Financing categories are low on both average funding and age.
The financial technology (fintech) industry has seen 3981 investors and $141B total all time funding. Let’s analyze which fintech categories have the most number of investors actively financing the startups. The graphic below highlights fintech categories based on the number of investors in each category.
As the graphic demonstrates, Consumer Lending has the highest number of investors at 1110, with Business Lending following behind at 848. Consumer Lending companies offer new ways for consumers to obtain personal loans and have credit risk assessed. Business Lending companies do the same for corporations. In addition, the average number of investors across all fintech categories is 538.
For this quarter’s funding analysis, let’s examine how average funding event sizes in the financial technology (fintech) sector are evolving. The graphic below shows the fintech average funding event size over time by quarter.
As the graphic demonstrates, fintech average funding event size in Q1 2019 was at $54M, which dipped by 4% from the $56M last quarter. The average funding size has been on a strong upward trend, with the average funding size last quarter around 4 times larger than it was 5 years ago. The top three funding events in Q1 2019 include a $1.3B round from Sea, a $750M round from CommonBond, and a $440M round from OakNorth.