In brief
Surging digital payments helped drive funding for Stripe, which dominated Q1’s venture capital investment activity.
Payments venture capital Q4 2020 investment activity at a glance:
VC deal activity in Q1 2021 largely followed trends seen last quarter, but while deal volume rose only marginally (2.5%), we saw a substantial increase (54%) in deal value.
As in Q4, alternative payments systems were the biggest targets, accounting for 56% of funding value with large tickets for alternative payment methods aggregator PPRO and cross-border payments platform Payoneer. Payment acceptance devices accounted for 14% of VC funding while processing was the focus of 13% of deals.
As in Q4, alternative payments systems were the biggest targets accounting for 56% of funding value with large tickets for alternative payment methods aggregator PPRO and cross-border payments platform Payoneer.
Most funding activities were contributed jointly by venture seed funding rounds, followed by series A funding.
In this quarter, Europe and North and Central America attracted the largest number of investments (35% each), followed by Asia (17%) and the Middle East and Africa (9%). In terms of value, North and Central America accounted for 41% of total deal value followed by Europe, Asia, and the Middle East, Africa at 33%, 19%, and 4% respectively.
|
Region |
Deal volume |
Deal value |
|
North and Central America |
35% |
41% |
|
Europe |
35% |
33% |
|
South America |
2% |
1% |
|
Asia |
17% |
19% |
|
Middle East, Africa (MEA) |
9% |
4% |
The biggest deal this quarter was the raising of US$600m in H round funding by Stripe, an Irish-American financial services, and software-as-a-service company, valuing it at US$95b. The round was led by Sequoia Capital and other investors. The funding will help Stripe expand operations in Europe, support increasing demand from the region and expand its global payments and treasury network.1
The second-biggest deal this quarter was the US$450m investment in UK-based payment processing company, Checkout Ltd, which is now valued at US$15b. The company offers an online payment platform focused on accepting transactions, currencies, and payment methods through one integrated platform providing complete transparency across the entire payment value chain. Tiger Global Management led the round, with other investors including Insight Partners and Green Oaks Capital. Checkout plans to use the funding to enhance its global business.2
The US$300m investment in US-based fintech firm Payoneer rounded out the quarter’s top 3 VC deals. Payoneer offers online money transfers, digital payment services and provides customers with working capital. The funding round was led by T. Rowe Price Group, Wellington Management Group, and others. In February 2021, Payoneer announced a plan to go public, saying it had entered into an agreement with special purpose acquisition company (SPAC) FTAC Olympus Acquisition Corp. (NASDAQ: FTOCU) for reorganization.3
Blockchain technology will attract increased investment, fueled by major financial services companies adopting cryptocurrency as a payment method and more start-ups entering this market.
Throughout 2021, we expect three trends to dominate VC investment in payments: