Fintech startups raised record $22.8 billion in Q1 2021: Report

Fintech firms globally raised a record $22.8 billion in the first quarter of 2021, more than double the previous quarter, according to a report from CB Insights, a data platform.

Fintechs raised $22.8 billion across 614 deals, compared to $10.8 billion across 560 deals in the last quarter of 2020. The record beats the $22.3 billion raised in the second quarter of 2018, which included Ant Financial’s historic $14 billion funding round in China.

Large rounds of over $100 million, accounting for 69 percent of total funding in the quarter, drove the boom, at a time when digital payments, investing, insurance and more has become mainstream during the COVID-19 pandemic as people stay at home.

Investing app Robinhood, payments firm Stripe, short term loan provider Klarna and Chinese financial security firm Paradigm raised the biggest rounds of the quarter- aggregating to $5.7 billion.

European fintechs raised $5.04 billion in the quarter, a 180 percent rise from $1.8 billion the previous quarter, while in the US, despite being the most mature market, it nearly doubled to $12.8 billion from $6.8 billion. Asia, the second largest market, raised $3.6 billion, compared to $1.9 billion the previous quarter.

Indian fintech also has been on a tear, with credit card payments firm Cred, payments gateway Razorpay and lender BharatPe being valued at $2 billion, $3 billion and $950 million- increases in a very short period.

Mergers, acquisitions and Initial Public Offerings by fintechs too shot up during the quarter, with 11 IPOs and 67 M&A deals, compared to 10 and 50 the previous quarter. Many of these companies also went public via Special Purpose Acquisition Companies, or SPACs- a newly popular option whereby startups can list with fewer regulatory requirements than ever before. Brokerage firms Bakkt and eToro, personal finance startup SoFi and neobank MoneyLion all went public via this route.

However, fintech IPOs have broadly lagged the S&P 500 benchmark index, underperforming relative to other technology sectors and the stock market as a whole, the report said.

Among sub-sectors of fintech, payments, digital lending, small and medium businesses and wealth management grew the fastest in terms of funding they received, while banking, capital markets and insurance saw investments slow down compared to the previous quarter.