VCs like bees around honey as fintech heats up

VCs like bees around honey as fintech heats up

Almost 1000 distinct venture capital investors have participated in the fintech feeding frenzy that has gripped the financial services sector over the past three years.

According to data compiled by M&A advisory firm Solganik Digital Media, since 2012, 992 different VC investors have participated in at least one of the 1250 total rounds raised by fintech startups, and roughly half of these investors have been active in the space.

2015 has seen an acceleration in the trend, with VC investment for the year-to-date currently standing at a whopping $5.75 billion, way up on 2012’s $1.46 billion.

As the median deal size reached $7.8 million this year, fintech deals with VC participation have seen a median post-money valuation of more than $71 million, says Solganick, with much of the investment ploughed into high-growth areas like mobile payments, personal wealth management, and marketplace lenders.

Whether the sector can continue to thrive throughout 2016 is open to debate. Speaking recently to Inc. magazine, fintech enthusiast Max Levchin cast a cloud over funding prospects heading in to the next year.

"My general view of the world is that raising money for series B will be harder in 2016 than it was in 2015 in fintech," he told the mag. "There's a perception of oversaturation or at least significant overinvestment in too many small bets being taken by venture capital."

He says his own startup Affirm has been approached by a number of hotshot firms looking for a fast exit.

"It's still very few and far between right now, but I expect it will increase significantly," he said. "My guess is that you will see a lot of M&A and failure activity."

Comments: (1)

A Finextra member
A Finextra member 22 December, 2015, 22:34Be the first to give this comment the thumbs up 0 likes I totally agree. There will be startup failures. However, in an industry that spend most of the investment and management effort in compliance projects, innovation is suffering. Earlier this year I read an interview with a bank leader boosting that 450 staffers were involved in a new mobile payment project - more than 10 times as many as a well funded startup need to do the same job. When the blood start running in the streets banks should pick up some of those companies. That' can bring bank innovation a long way in a short time.