Fintech investors appear to be favoring later-stage deals as sector takes a hit, recent data shows

2 years ago 303

Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. Let’s goooo! — Mary Ann

I was mostly off this past week, so this edition of The Interchange may be slightly less dense than normal. Some observations, though. We saw fewer layoffs, but also less fintech-related news in general. Things were generally pretty quiet and not filled with as much controversy as weeks past. Honestly, we’re really eager for this quarter to end so we can drill down into the numbers to see just how much the funding landscape has changed compared to 2021. Until then, we took a look at some recent numbers.

Fewer deals, larger rounds – but still way down

My dear friends and co-hosts on the Equity Podcast, Alex and Natasha, last week discussed the fintech funding market not once, but twice — here and here. Meanwhile, it felt like there was a bump in fintech-related funding announcements. That got me curious enough to reach out to my old friends at Crunchbase to get some data on just how much fintech startups have raised in recent weeks. (Keep in mind that it is preliminary and there is also a lag — so there will most certainly be more deals and dollars reported for the same time periods in the future.) I was mostly expecting to see a bump in numbers. And I did, sort of. Here is what the data showed: Globally, funding was up very slightly in terms of dollars raised, but deal volume was down significantly last week compared to the weeks prior. Specifically, Crunchbase found that fintech startups raised $1.5 billion from June 16 to June 23 across 39 deals — compared to $1.4 billion raised across 53 deals the week prior and $1.2 billion across 59 deals 2 weeks prior. This tells us that there were more earlier-stage deals closing earlier this month, while this past week, we saw far fewer deals but larger round sizes.

We saw a similar trend here in the U.S. According to Crunchbase, fintech startups in the United States raised $400 million across 10 deals from June 16 to June 23. That compared to $300 million raised across 14 deals the week prior, and $300 million raised across 17 deals 2 weeks prior.

But notably, and perhaps even more startling, is the difference between these numbers compared to June 2021. Globally, fintech startups raised a total of $8.2 billion across 272 deals from June 1-23, 2021. That compares to a total of $4.2 billion across 151 deals during the same time period this year. Meanwhile, U.S.-based startups raised $1.9 billion across 101 deals from June 1-23, 2021. That compares to a total of $1 billion across 41 deals during the same timeframe this year. Whoa. That’s like nearly half the dollars raised both globally and in the U.S. So while this is just a small snapshot in time, it is still indicative of what we all know is taking place — a global slowdown in funding, and proof that fintech is not immune.

For the record, Crunchbase defines fintech as companies that integrate technology in the financial services sector.

Takeaway: Fewer funding deals are closing in the fintech space, and during the month of June at least, investors seemed to be taking more bets on later-stage companies so dollars raised actually inched upward as the month wore on. This means it is likely getting tougher and tougher for earlier-stage companies to win over VCs, who are reportedly conducting more due diligence and asking for more traction than in the whirlwind that was 2021.

Photo: PM Images/Digital Vision/Getty Images

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