Last year, more than 20% of venture dollars went into fintech startups globally, according to CB Insights. Also known as:
One-third of unicorns created by 2021 will be fintech companies.
This year, the market Conditions are very different in every sector, including fintech. But while the pace of funding in the fintech space this year has been very slow – and falling – the reality is that the sector still accounts for the largest share of venture funding globally. For example, in the second quarter, 18% of global venture dollars went into fintech startups.
To give TechCrunch+ readers a unique insight into what fintech investors are looking for right now and what you need to understand before approaching them, we interviewed eight active venture capitalists in the sector over the past two weeks. Their answers have been edited for brevity and clarity.
Here are the ones we scanned.
- Paul Stamas, Managing Director and Co-Head of Financial Services, General Atlantic
- Alda Leu Dennis, General Partner, Initialized Capital
- Michael Gilroy, General Partner and Associate Head of FinTech, Coatue
- Justin Overdorff, Partner, Lightspeed Venture Partners
- Addie Lerner, Founder and Managing Partner, Avid Ventures
- David Jagen, Managing Partner, F-Prime Capital
- Nik Milanovic, General Partner, FinTech Fund
- Jay Ganatra, Co-Founder and Managing Partner, Infinity Ventures
Paul Stamas, Managing Director and Co-Head of Financial Services, General Atlantic
Fintech startups worldwide It has raised $131.5 billion in venture funding by 2021. As a firm that has been investing in the space for some time, what kind of landscape have you seen since last year at this time? Were the deals more competitive last year?
There is no doubt that the deal situation is lower now than it was at this time last year, especially with regard to late growth. Many companies are focused on optimizing their business and waiting to test the market. Relative to public market prices, the expected bid-ask spread in the private market still appears to be widespread.
Deals feel less competitive, but there are still plenty of capital providers — General Atlantic being one of them — who are more than happy to continue investing in great opportunities and backing great entrepreneurs. The environment has slowed down the deal, which, honestly, is probably a good thing. It gives companies and investors more time to get to know each other and do their due diligence.
“Difficulty creates resilience, and we anticipate that some exceptional companies will emerge from this market cycle.” Justin Overdorff, Partner, Lightspeed Venture Partners
Many people call this failure. How has your investment research changed over the past several months, and are you still closing deals at the same pace?
Our thesis has remained largely the same. We are still excited to invest in long-term themes related to the transition to the digital economy and the globalization of entrepreneurship, and we actively pursue opportunities to support visionary entrepreneurs with proven business models. It’s always a case of situations where we believe in and the company believes in, that we can be a trusted partner and add valuable value. As we move into a more challenging macro environment, perhaps that hope will resonate even more. We like to think that our 40-year track record in some of the most complex work environments puts us in a position to help.
Fintech companies often have multiple revenue streams – adding new product lines, building on fees, etc. How effective will these controls be for fintech companies looking to hedge against 2020-2021 growth rates in 2022?
