Fintech

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CBInsights recently held a webcast that offered a recap of 2018 events affecting the fintech sector. Global fintech investment reached a record at $39 billion in 2018. Venture-backed fintech deals declined in the fourth quarter of 2018 but remain high compared to historic levels. Early stage fintech deal share declined compared to 2017. There are now 39 fintech unicorns globally, valued in aggregate $147.37 billion. There were 16 fintech companies that joined the unicorn ranks in 2018. There were 52 fintech financing rounds that each raised in excess of $100 million. Only three fintech unicorns undertook IPOs in 2018. CBInsights identified ten fintech trends to watch in 2019. Outside of the United States, fintech startups are applying for bank charters. Fintech companies are continuing to strengthen their regulatory compliance efforts as regulatory scrutiny has increased. Fintech startups are providing access to new asset classes and fintech companies are becoming more entrenched in the real estate and mortgage markets. CBInsights predicts that mega-rounds will delay IPOs.

The number of small businesses in the United States continues to climb, according to a recent CB Insights report. In 2015, there were approximately 31.9 million small businesses in the United States. There are now an estimated 39.9 million small businesses, with a projected 2.6 million additional firms expected by 2020. Defined as firms with 0-49 employees, small businesses are active in a wide variety of industries with healthcare, hospitality/food services and retail trade as the top three sectors.

While U.S. small business growth is promising, many small businesses face difficulties accessing capital. According to a Federal Reserve survey cited in the report, 44% of employer firms noted credit availability or securing funds for expansion was a major challenge. Accessibility to funding, however, seems not to have slowed the growth in the fintech sector.

Fintech startups have raised over $10 billion in funding since 2013. Small business payments companies have raised approximately $3.9 billion in funding since 2013. Accounting/tax and fundraising fintech small businesses follow with $2.1 billion and $1.7 billion of funding secured, respectively, since 2013.

For additional trends affecting small business and fintech, see CB Insights’ report: https://www.cbinsights.com/reports/CB-Insights_The-US-Small-Business-Fintech-Report.pdf

According to a recent research report by CB Insights, in the third-quarter of 2018, there were 375 VC-backed equity financings that raised over $5.64 billion for fintech companies globally. In total, 1,164 fintech financings have been completed in 2018, through October 31, raising over $32.6 billion in offering proceeds.  Approximately 40% (462) of these deals are from U.S. issuers.  Payments, alternative lending, and capital markets tech companies accounted for the majority of fintech financings, with 169, 145 and 141 deals completed in 2018, respectively.

The fintech sector also continues the trend of late-stage financings for companies that wish to remain private.  In the United States, there were 17 mega-rounds, or financings of over $100 million each, completed by fintech companies. There are now 34 fintech unicorns globally, valued at $117 billion, in aggregate. 21 of these unicorns are U.S. companies, with four having completed mega-rounds in 2018.

To read CB Insights’ full briefing report, click here.

 

Thursday, September 20, 2018
11:00 a.m. – 11:30 a.m. EDT

On July 31, 2018, after a review period following its initial proposal, the Office of the Comptroller of the Currency (OCC) announced it would begin accepting applications for its special purpose national bank charter for financial technology (fintech) companies. While the New York State Department of Financial Services has (again) sued the OCC claiming that it lacks the legal authority to issue this type of charter, companies are actively exploring the OCC fintech charter as well as other bank charter alternatives, such as industrial loan companies (ILCs), to facilitate their nationwide operation. Because many of these companies want to avoid owning a “bank” and being regulated as a bank holding company, there is a particular interest in those depository institutions excluded from the Bank Holding Company Act’s definition of “bank.”

Please join Mayer Brown partners Tom Delaney, Jeff Taft and Don Waack as they answer:

  • What are the potential advantages and disadvantages of an OCC fintech charter?
  • What are the alternative banking charters, such as ILCs, credit card banks and full-service insured depository institutions?
  • What is a “bank holding company”? (And why you may want to avoid this status.)

For more information, or to register for this complimentary session, please visit the event website.

Fintech companies continue the global trend of companies choosing to remain private longer and raising large amounts of capital through private channels.  A recent CB Insights report covered the financing trends of fintech companies for the first half of 2018.  As of the date of the report, there were 29 fintech unicorns valued at $84.4 billion globally.  The second quarter of 2018 valued five fintech companies at unicorn status (over $1 billion).  Three of these new unicorns are based in the United States.

U.S. fintech companies raised $3.2 billion in new capital over 146 deals in the second quarter of 2018, bringing the total number of deals for the first half of the year to 303, raising approximately $5.3 billion.  Compared to Q2 2017, last quarter’s total capital raised increased over 52%.  Not surprisingly, later-stage capital raises made up over 83% of deals in the second quarter, raising approximately $2.7 billion over 74 deals.

There was only one IPO exit by a fintech unicorn in the U.S. in the second quarter of 2018, which raised $874 million.  Globally, M&A exits accounted for approximately 85% of fintech company exits, with 39 M&A transactions, while there were only seven fintech IPOs completed in the first half of 2018.

For more information, read CB Insights’ Global Fintech Report Q2 2018.