Library: CB Insights – State Of Fintech Q2 2021 Report

Executive summary :

Overall fintech trends

Fintech funding hits new high

Q2 2021 was the largest funding quarter on record. Across 657 deals, global venture capital (VC) backed fintech companies raised a record $30.8billion, shattering last quarter’s funding record by 30%.

This impressive funding growth was accompanied by a modest 2% deal growth quarter-over-quarter (QoQ) and a 29% increase year-over-year (YoY).

Funding activity grew in nearly all fintech sectors except for wealth tech and capital markets tech. The digital lending, banking, and SMB fintech sectors saw the most pronounced deal activity growth QoQ.

An explosion of mega-rounds drove the funding boom. This quarter, global fintechs raised 88 mega-rounds (deals worth more than $100million) — up from 60 in Q1 2021 — accounting for 70% of total funding. As a result, the average deal size grew 28% from nearly $37million in Q1 2021 to $47million.

Funding to South America-based fintechs grew dramatically by 153% QoQ, while deal activity on the continent grew 52% QoQ — the largest increase among regions. Deal activity was varied with QoQ growth across North America, South America, and Australia, while Asia, Europe, and Africa all saw deal declines.

However, across the board, all continents saw increased funding. Fintech public exits reached new highs.

There were 19 public exits (including announced, but not yet completed, deals) for VC-backed fintech companies in Q2 2021.

In addition to traditional IPOs, a notable portion of these deals represented SPACs, which have become an increasingly popular path for fintechs to enter public markets. This quarter, Grab, better.com, Dave, and Acorns all announced plans to go public via SPACs.

Fintech sector financing trends

Payments companies raised over $8B in Q2’21, a QoQ increase of 25%. Deal activity in the same period fell 5% to 114. There were 24 mega-rounds, which accounted for over 80% of total funding.

Banking companies had a record-breaking quarter. Deal activity grew 59% QoQ and funding grew 43%. There were 16 mega-rounds, which accounted for 68% of total funding.

Funding and deal activity to digital lending companies exploded to nearly $7B across 126 deals, representing QoQ growth of 76% and 19%, respectively. Mega-rounds doubled this quarter to 16 from Q1’21.

Wealth management: Funding fell by 21% QoQ to $4.4B, while deal activity grew slightly. Wealth tech saw 12 mega-rounds — a new record — making up 77% of total funding in the quarter.

Insurtech funding surged by 79% in the quarter while deals remained flat, as mega-round activity bolstered funding growth. Mega-rounds represented 66% of total funding in the quarter.

Capital markets deal activity fell 10% QoQ, marking the third straight quarter of decline. After a record Q1’21, funding fell by 82% to $5.1B.

Fintechs focused on SMBs had a strong quarter. Funding grew 37% to $5.9 billion. SMB deal activity was the strongest it’s been in 5 quarters, increasing 47% QoQ to 85 deals.

Real estate: Despite a 20% decrease in deals, late-stage mega-rounds pushed funding to a 5-quarter high. Real estate fintech funding increased 25% QoQ to $3.2 billion.

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