CB Insights’ 2021 State of Venture Report confirms fintech funding smashed several records last year, with $132 billion raised. Fintechs captured $1 in every $5 from venture capital firms.
Fintech funding by the numbers:
Volume, exits, and early-stage deals all ticked up last year.
- Fintech funding increased by 169 percent from 2020 to $131.5 billion in 2021, the highest level ever.
- At $34.9 billion, Q4 funding was the second-largest quarterly haul in history, including a last-minute $1 billion raise by crypto tech firm NYDIG.
- There were also a record number of mergers and acquisitions, IPOs, and SPAC exits-M&A and IPOs peaked in Q4.
- In addition, the proportion of early stage deals increased from 61 percent to 64 percent, indicating that younger startups were not left out despite the mega-rounds that made headlines.
What’s coming in 2022?
We predict fintech funding will surpass 2021 levels and exceed the $150 billion mark as several areas, like blockchain and B2B tech firms, attract a wide pool of investors.
- Open finance and blockchain, for example, will attract a larger pool of global investors, including hedge funds.
- Crypto exchanges will continue to raise a lot of money. Despite recent volatility, leading financial institutions such as Goldman Sachs remain bullish on cryptocurrency prices.
- And large firms are still digitizing - S&P 500 companies will increase their capital expenditures and research and development investment by 18% this year from 2019 levels, per Goldman Sachs.
- According to an ITRS Group survey, 94 percent of financial services firms are struggling with the frenetic pace of digital transformation over the last two years.
- As large corporations increase their investments in, and struggle with, digitization, B2B fintechs that can provide white-label solutions or the infrastructure to build them in-house will attract funding.
- In addition, several recent venture capital war chests focused on fintechs, such as Ribbit Capital's $1.5 billion pot, indicate increased investment in the sector.