Here’s How Much Fintech Funding Has Dropped
Last year, financial services were the leading sector for venture capital investment, with at least $131 billion worldwide for space startups.
This year, the industry continues to rank among the top recipients of venture capital funding. However, investment in startups in the space has fallen every quarter this year, with the fourth quarter likely the lowest yet.
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To get a sense of the funding trajectory, we mapped global investments over the last five calendar quarters.
Even with the sharp year-over-year decline, funding for financial services is still high by historical standards. Currently, 2022 is on track to provide the second highest funding total in the past five years. For more perspective, below are the investment and rounding count totals:
Public procurement perspective
Changing public market sentiment appears to be a major driver of change in corporate appetite for fintech deals.
So far this year, virtually every venture-backed company that took advantage of last year’s wide-open IPO window is down sharply from its peak. This applies to at least 20 companies, listed herewhich debuted on US exchanges, including high-profile offerings of Coinbase, Robin Hood and SoFi.
In recent quarters, meanwhile, major fintech IPOs simply haven’t happened. This has multiple and sometimes different effects on venture capital funding. For one thing, without IPOs, we don’t see big pre-IPO rounds. On the other hand, companies that were considering public offerings might instead choose to seek more private funding.
Some of the biggest rounds this year, in fact, were companies that generated a lot of buzz as potential IPO contenders. This includes Klarnathe platform buy now, pay later, which raised $800 million in July after reducing its valuation by 85%.
Seed funding is also decreasing
Seed and start-up investments in fintech and financial services are also down sharply. For some sense, we’ve mapped the funding and deal count for the space over the past six quarters at Seed, Series A, and Series B:
At first, some of the recent declines can be attributed to fewer very large rounds and likely more constraints around valuations.
Last year, for example, FTX raised more than $1.4 billion in Series B funding at a peak valuation of $25 billion, according to data from Crunchbase. This year, we hope that venture capitalists will refrain from putting that kind of money to work in any company with clear red flags on compliance and corporate governance.
The dataset for funding analysis includes companies categorized by Crunchbase as one of several fintech and financial services-related sectors. Companies included in the results may be entirely focused on financial services or include financial services as an important part of their business models. Funding rounds included in the results totaled at least $200,000 and included companies founded no more than 20 years before the funding.
Drawing: Dom Guzman
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