31 July 2014

Payments start-ups raise $1.2 billion across 193 deals in 2013

10 January 2014  |  8180 views  |  0 cash

A 16% decline in M&A and IPO activity in the payment space in 2013 was more than compensated for by a boom in early-stage investing, according to data from CB Insights, as a mix of VCs and corporate venture firms all continued to jockey for a piece of this massive industry.

The analyst group says that in 2013, payments start-ups raised $1.2 billion in funding across 193 deals. On a year-over-year basis, venture capital funding and deals to payments tech companies ticked up five percent and six percent, respectively, from 2012 levels.

Deal growth was concentrated at the early stage, with seed funding accounting for 42% of all deals in the payments space over the past two years. Of the payments start-ups that first received a seed round between Q1 2010 and Q3 2012, 35% went on to eventually receive Series A funding.

The data shows a diversity of active investors in the payments space, spanning pure-play VCs to the corporate venture units of financial services firms and cash-rich tech companies. The most active investors over the past two years have been Accel Partners, which counts Braintree, Gumroad and GoCardless in its portfolio and Andreessen Horowitz which has invested in firms including Dwolla, Boku and Jumio.

Interestingly, the most active corporate investor in the payments space was not in financial services but Intel Capital, which has done a handful of deals since the start of 2012.

On a year-over-year basis, the payments space has seen a 16% drop in M&A and IPO activity, says CB Insights. While 2013 saw a number of small-ball payments acquisitions for both technology and talent, there were a few notable exits including PayPal's $800M acquisition of Braintree and FIS's buyout of Ignition Partners-backed mFoundry.

Moving forward, says the firm, the anticipated 2014 IPO of Square is likely to provide another shot in the arm for the industry.

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