With 2018 now behind us, let’s examine how funding in financial technology (fintech) compares to previous years. The graphic below shows the total annual fintech funding amounts over time.
As the graphic demonstrates, 2018 experienced the highest fintech funding on record at $41B. It represents a whopping 78% increase from the previous year’s funding. In addition, fintech funding grew at a CAGR of 61% from 2013 to 2018. We’re excited to see if its funding can reach an even higher level in the new year.
The fintech industry has seen $125B in total all time funding. Let’s analyze the investors making bets into fintech and identify the most active firms.
The graphic below shows fintech investors based on their number of investments into the sector. If an investor participates in two investment rounds in the same company, that would qualify as two investments for this graphic.
As the graphic demonstrates, 500 Startups has made the most bets in the fintech sector with 147 investments. Y Combinator follows in second place with 116 investments. Examples of companies 500 Startups invested in include Credit Karma, Finova Financial, First Circle, and Albert. It’s interesting to note that Silicon Valley Bank is on this list, as sometimes it operates as a corporate investor in this space. Let’s see which investors make their way onto this list over the next year!
We’ve previously highlighted that financial technology funding is on pace to have a record year in 2018. When we take a closer look at the categories that make up fintech, we notice that the Consumer Lending category leads in both Q3 and overall funding.
We’ll highlight this conclusion with some graphics and discussions below.
The Consumer Lending Category Leads Financial Technology In Q3 Funding
To start off, let’s review the amount of funding raised this quarter by each category within financial technology.
The above graphic highlights that the Consumer Lending category leads the sector in Q3 funding with $3.7B. Its funding is 2.5 times the funding of the next category, Business Lending at $1.5B.
Consumer Lending companies offer new ways for consumers to obtain personal loans and have 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 investigate how the fintech categories’ funding compare with each other historically.
The Consumer Lending Category Also Leads in All-Time Funding
The graph below shows the all-time funding for different financial technology categories. The Q3 funding and growth rates of these categories are also highlighted.
As the bar graph indicates, the Consumer Lending category also leads financial technology in total funding at $33B. Payments Backend and Consumer Payments follow in the second and third place spots with $28B and $27B in total funding, respectively.
In summary, the Consumer Lending category is leading the fintech sector in both Q3 funding and all-time funding. Let’s see how the the rest of 2018 shapes up for financial technology!
The financial technology sector has reached record highs in its funding and exit activity. This blog post examines the different components of the fintech sector and how they make up this startup 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 2,545 financial technology startups into 16 categories that have raised $118 billion. 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 336 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 Established Quadrant Has the Most Financial Technology Categories
Our Innovation Quadrant divides the financial technology categories into four different quadrants.
We see that the Established quadrant has the most financial technology categories with 7. These categories have reached maturity with less-than-average funding. The Pioneers quadrant has 6 categories that are in the earlier stages of funding and maturity. The Disruptors quadrant contains 2 categories: Consumer Lending and Consumer Payments. These categories have acquired significant financing at a young age. The Heavyweights quadrant has Payments Backend as its one category. This category has reached maturity with significant financing.
We’ve analyzed the financial technology categories and their relative stages of innovation. Let’s now look at how they stack up against one another in terms of their total funding versus company counts.
Consumer Lending Startups Have the Most Funding
The graph below shows the total amount of venture funding and company count in each category.
As the above graphic implies, in addition to leading in total companies, the Consumer Lending category also leads in total funding with $33 billion. Payments Backend and Consumer Payments follow in close second and third places with $28B and $27B, respectively.
Conclusion: The Consumer Lending Category Leads Financial Technology
The analysis above highlights that Consumer Lending leads the sector in both total companies and total funding. We’ll see if any of the other categories catch up during the rest of 2018.
After conducting a deeper examination on our fintech research platform, we see that exit activity thus far in 2018 is trending slightly lower than in 2017.
2018 Mid-Year Fintech Exit Activity Lower Than 2017 But Higher Than 2016
Let’s take a closer look at the number of fintech exit events by year.
The above graphic shows 38 exits in the first half of 2018. For the past three years, Q3 and Q4 accounted for 50% of total exit events on average. If that trend holds, 2018 will have around 76 exit events. That would be slightly lower than the number of exits in 2017 but higher than that in 2016.
In summary, we observe that the fintech sector’s exit activity in 2018 is trending lower than 2017 but higher than 2016. We’ll see if the second half of the year changes this trend!