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1 Global Fintech Report Q1 2019 2 WHAT I S CB INS IGHTS? CB Insights is a tech market intelligence platform that analyzes millions of data points on venture capital, startups, patents, partnerships and news mentions to help you see tomorrow’s opportunities, today. cb in s igh t s . com 3 T R U S T E D B Y T H E WO R L D ’ S L E A D I N G C OMPAN I E S “We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources.” Beti Cung, Corporate Strategy, Microsoft 4 June 11 - 13, 2019 New York, NY events.cbinsights.com/future-of-fintech 5 events.cbinsights.com/future-of-insurance 6 Contents 9 Q1’19 Financing Trends Quarterly Deals & Dollars Regional Trends Q1’19 Top VC-Backed Fintech Deals Fintech Unicorns 21 64 Q1’19 Fintech Sector Trends Appendix: Major markets financing trends Most Active Fintech Investors Q1’18 - Q1’19 Methodology 7 India challenges China for the top Asian fintech market: India was the top Asian market for VC-backed fintech funding in Q1’19 with $286M in funding, narrowly surpassing China. China saw funding fall to $192M, a 89% drop QOQ. India and China both saw 29 deals. In Q1’19, Europe beat Asia in funding and the US remained the top market for deals with 170 investments worth $3.3B: Europe saw funding grow to $1.7B, surpassing Asia which saw $875M in funding in Q1’19. Asia saw 127 deals, beating out Europe. Q1’19 saw record M&A deals between payment incumbents, more fintech mega-rounds to support staying private, and lackluster IPO activity: The quarter saw 2 record-breaking acquisitions between payment incumbents: Fiserv acquired First Data for $41B in January and FIS acquired Worldpay for $43B in March. Q1’19 saw 13 $100M+ financing deals to VC-backed fintech companies. Q1’19 only had 1 unicorn IPO with Tiger Brokers. Note: This report focuses on equity rounds to VC-backed fintech companies. This report does not cover companies funded solely by angels, private equity firms, or any debt, secondary, or line of credit transactions. All data is sourced from CB Insights. Summary of findings Q1’19 VC-backed fintech funding dropped but deals remain strong: In the first 3 months of 2019, VC-backed fintech companies raised $6.3B across 445 deals globally. Deals were up 4% quarter-over-quarter (QOQ) while funding dipped 13%. Asia saw funding fall as a result of tighter regulatory oversight in China: Fintech funding in Asia fell below $1B for the first time in five quarters. Funding dropped to $875M, a 67% drop QOQ. Deals grew to 127 supported by strong growth in India, which saw 29 deals. Late-stage deal share grew to a 5-quarter high as investors continued to concentrate bets in perceived winners: Global Series D and Series E+ fintech deals grew to 8% in Q1’19. US early-stage deal share was flat QOQ as investors continued to concentrate their bets in established fintech unicorns. There are 41 VC-backed fintech unicorns worth a combined $154.1B: Q1’19 saw three new unicorn births (N26, Chime, and Airwallex) and three in the first month of Q2’19 (Bill.com, Liquid, and Lemonade). The cohort’s total valuation in 2019 continues to grow as a result of continued mega- rounds to existing unicorns, including Klarna and Stripe, among others. 8 LENDING BLOCKCHAIN/ CRYPTO REGTECH PERSONAL FINANCE PAYMENTS/ BILLING MONEY TRANSFER/ REMITTANCES WEALTH MANAGEMENT CAPITAL MARKETS MORTGAGE/ REAL ESTATE INSURANCE GLOBAL FINTECH REPORT Q1’19 Marketplace lending & alternative underwriting platforms Payments processing, card developers, & subscription billing software tools Tools to manage bills and track personal and/or credit accounts Audit, risk, and regulatory compliance software Companies leveraging blockchain technologies for financial services Companies selling insurance digitally or providing data analytics and software for (re)insurers Sales & trading, analysis, and infrastructure tools for financial institutions Investment and wealth management platforms and analytics tools International money transfer and tracking software Mortgage lending, digitization, and financing platforms WHAT THIS REPORT COVERS 9 $16.5 $19.4 $18.3 $40.3 $6.3 1,191 1,304 1,564 1,829 445 2015 2016 2017 2018 2019 Global fintech funding hit $6.3B in Q1’19 Annual global VC-backed fintech deals and financing, 2015 – Q1’19 ($B) G L O B A L F I N T E C H D E A L S A N D D O L L A R S S T A R T 2 0 1 9 S T R ONG 10 $2,764 $4,997 $6,417 $2,319 $5,402 $8,495 $2,970 $2,561 $3,266 $5,797 $4,649 $4,563 $6,174 $20,750 $6,110 $7,282 $6,320 266 299 342 284 350 326 313 315 391 405 386 382 470 466 466 427 445 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 VC-backed fintech deals rebounded in Q1’19 after dip Quarterly global VC-backed fintech deals and financing, Q1’15 – Q1’19 ($M) Q 1 ’ 1 9 D E A L S C L O S E T O R E C O R D H I G H S 11 $2,595.4 $3,483.6 $3,120.9 $3,571.8 $3,492.0 $2,159.3 $2,203.8 * $1,928.7 $2,612.6 $874.7 $1,083.3 $942 $804.9 $803.7 $1,713.0 $0.6 $61.3 $30.3 $11.2 $66.9 $56.6 $25.4 $204.7 $72.0 $130.6 $278.8 $33.9 $20.7 $210.8 $42.6 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Europe pulled ahead of Asia for fintech funding for the first time in five quarters Global VC-backed fintech funding by continent, Q1’18 – Q1’19, ($M) *Ant Financials' $14B round in Q2’18 was excluded from the chart represented on this slide for illustrative purposes Africa South America Europe North America Australia Asia 12 Q1’19 fintech deals fell below Q1’18 totals in most markets Global VC-backed fintech deals by continent, Q1’18 – Q1’19 Note: Charts not to scale 2 8 10 8 8 7 4 7 8 5 20 14 16 9 14 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Africa Australia South America 228 197 183 163 189 131 157 147 119 127 82 86 103 120 102 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 North America Asia Europe 13 60% 58% 54% 63% 60% 18% 20% 24% 20% 23% 7% 6% 6% 5% 8% 15% 16% 16% 12% 9% Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Mega-rounds continued in Q1’19, boosting late- stage fintech deal share to a 5-quarter high Annual deal share by stage to global VC-backed fintech companies, Q1’18 – Q1’19 Mid-Stage Early-Stage Late-Stage Other 14 Q1’19: 13 fintech mega-rounds total $2.36B Global number of fintech mega-rounds ($100M+), Q1’18 – Q1’19 F I N T E C H M E G A - R O UN D I N V E S TM EN T S R EMA I N E D S T R ONG I N Q 1 ’ 1 9 3 5 7 11 7 4 7 4 3 1 4 1 1 1 4 1 1 1 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 North America Asia Europe South America Australia 15 Company Deal Date // Amount Raised Total Disclosed Funding Select Investors Description Jan’19 // $500M $925M ($1.2B Valuation) Greenoaks Capital Management, First Round Capital, Sequoia Capital Tech-enabled health insurance carrier Jan’19 // $300M $512.6M ($2.7B Valuation) Insight Venture Partners, GIC, Greyhound Capital Digital-first “challenger bank” for retail banking services that allows customers to open accounts remotely using just a mobile application Mar’19 // $250M $503M ($2.7B Valuation) Bessemer Venture Partners, Generation Investment Management, Lead Edge Capital, T. Rowe Price, Tiger Global Management, TCV Restaurant management system Jan’19 // $240M $250.2M Fifth Wall Ventures, Foundation Capital Tech-enabled title insurance carrier Mar’19 // $200M $308.8M ($1.5B Valuation) Coatue Management, Dragoneer, DST, Forerunner Ventures, General Atlantic, ICONIQ Capital, Menlo Ventures Digital-first “challenger bank” for retail banking services that allows customers to open accounts remotely using just a mobile application Top 9 global fintech deals in Q1’19 The top deals to VC-backed fintech companies were all mega-rounds ($100M+) *Indicates unicorn deal 16 Company Deal Date // Amount Raised Total Disclosed Funding Select Investors Description Mar’19 // $125M $164.3M CreditEase Fintech, Goldman Sachs, Mubadala Ventures, Salesforce Ventures Tech-enabled insurance platform Jan’19 // $125M $205.9M Benchmark, Index Ventures, Sequoia Capital Open-source data streaming platform Mar’19 // $114M $178.2M Index Ventures, PayPal, Ribbit Capital, Thrive Capital Wealth management marketplace Jan’19 // $105M $263.8M ($800M Valuation) CNBC, Blackrock, Bain Capital Ventures Digital wealth management provider or robo- advisor Top 9 global fintech deals in Q1’19 5 of the top 9 deals went to VC-backed fintech companies in the US 17 41 FINTECH UNICORNS $154.1 BILLION G L O B A L L Y T H E R E A R E V A L U E D , I N A G G R E G A T E , A T 18 SWEDEN EUROPE $5.3B $1.6B $3.45B $8B $1.24B $1B NORTH AMERICA $22.5B Valuation $1.2B $3.2B $4B $2.9B $2B $2.1B (as of Q2’15) 41 fintech unicorns valued at $154.1B Global VC-backed fintech companies with a private market valuation of $1B+ (4/25/19) UNITED KINGDOM $1B $4.5B (as of Q1’17) SOUTH AMERICA $4B Valuation BRAZIL $3B $1B $1.2 - $1.6B $2.7B $1B $1.7B $1.9B $2.7B $1.27B $1.1B $1B (Q2’19) AUSTRALIA $2B (Q2’19) $2.36 - $2.8B Valuation $1.8B AUSTRALIA $1B Valuation UNITED STATES GERMANY $2.7B $1.5B $10B CHINA INDIA ASIA $1.4B $38B Valuation $1B $1.5B $1B SOUTH KOREA $1.2B $1B (Q2’19) JAPAN 19 SWEDEN EUROPE $5.3B $1.6B $3.45B $8B $1.24B $1B NORTH AMERICA $22.5B Valuation $1.2B $3.2B $4B $2.9B $2B $2.1B (as of Q2’15) Q1’19 saw 3 new fintech unicorn births UNITED KINGDOM $1B $4.5B (as of Q1’17) SOUTH AMERICA $4B Valuation BRAZIL $3B $1B $1.2 - $1.6B $2.7B $1B $1.7B $1.9B $2.7B $1.27B $1.1B $1B (Q2’19) AUSTRALIA $2B (Q2’19) $2.36 - $2.8B Valuation $1.8B $10B CHINA INDIA ASIA $1.4B $38B Valuation $1B $1.5B $1B SOUTH KOREA $1.2B $1B (Q2’19) JAPAN AUSTRALIA $1B Valuation UNITED STATES GERMANY $2.7B $1.5B 20 SWEDEN EUROPE $5.3B $1.6B $3.45B $8B $1.24B $1B NORTH AMERICA $22.5B Valuation $1.2B $3.2B $4B $2.9B $2B $2.1B (as of Q2’15) And Q2’19 is on track to see more new unicorn rounds UNITED KINGDOM $1B $4.5B (as of Q1’17) SOUTH AMERICA $4B Valuation BRAZIL $3B $1B $1.2 - $1.6B $2.7B $1B $1.7B $1.9B $2.7B $1.27B $1.1B AUSTRALIA $2.36 - $2.8B Valuation $1.8B AUSTRALIA $1B Valuation GERMANY $2.7B $1.5B $10B CHINA INDIA ASIA $1.4B $38B Valuation $1B $1.5B $1B SOUTH KOREA $1.2B $1B (Q2’19) $2B (Q2’19) UNITED STATES $1B (Q2’19) JAPAN Marqeta was finalizing plans to raise at least $250M at a valuation of about $2B, nearly quadrupling its value from two years ago. March 26, 2019 The image part with relationship ID rId2 was not found in the file. #AhaCBI Q1’19 Fintech Sector Trends 22 MACRO SECTOR TRENDS BANK TECH WEALTH MANAGEMENT REGTECH INSURTECH CAPITAL MARKETS PAYMENTS GLOBAL VC-BACKED FINTECH Q1 ’2019 DIGITAL BANKING 23 MACRO SECTOR TRENDS GLOBAL VC-BACKED FINTECH Q1 ’2019 DIGITAL BANKING 24 Challenger banks continued funding tear in Q1’19 VC-backed deals and financing trends to digital banking startups, Q1’18 – Q1’19 ($M) $734.2 $472.4 $277.6 $449.7 $704.6 17 11 18 15 17 -4 1 6 11 16 21 26 $(100.0) $100.0 $300.0 $500.0 $700.0 $900.0 $1,100.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 25 Challenger banks continue to spread globally 26 56 100 120 150 200 210 450 500 500 600 600 600 796 1,300 1,500 1,700 2,300 3,000 4,000 5,000 Tide Loot Lunar Way Pockit Greenlight Financial Starling Bank Varo Acesso Uala Monese Tandem Neon Gimi Qapital NuBank NuCanta Monzo N26 Chime Revolut NuBank Challenger banks are no longer a niche in fintech Digital banking companies have attracted millions of customer accounts (in thousands) Nu Canta 27 Digital challenger banks deal flow continued in Q1’19 Note: This chart includes non-VC-backed equity investments A host of different challenger bank startups raised equity funding in Q1’19. The top two rounds to challenger banks minted new unicorns, N26 and Chime. 0 28 B R E A K I N G G R O UN D I N N EW MA R K E T S N26 is a licensed challenger bank based in Germany that has amassed over 2.3M reported retail customers since launching in 2014. N26 has been leveraging the European Economic Area’s banking passport to expand to other EU countries. N26’s core products include a mobile app, digital checking and savings accounts, and connected debit card supported by Mastercard. N26 also offers business, freelance, and premium accounts. Next up, N26 is expanding in the US and the UK and considering Latin America. In the US, they are looking to launch cash back rewards. Last Funding $300M Series D // Q1’19 Select Investors Insight Venture Partners, Allianz X, Tencent Holdings, Valar Ventures Valuation $2.7B B AN K A C C O UN T F E A T U R E S R E T A I L , F R E E L A N C E , & B U S I N E S S A C C O UN T S 29 B AN K I N G O N M I L L E N N I A L S Chime is a mobile banking app that provides a checking account-like service through a partnership with Bancorp and debit cards through Visa. The account is free to open and provides $0 ATM access and overdraft protection. Additional services include a two- day payday advance for customers that direct deposit their paycheck to Chime and optional round ups savings accounts. In April 2019, Chime reported the company had opened 3M accounts. Last Funding $200M Series D // Q1’19 Select Investors Crosslink Capital, Forerunner Ventures, Menlo Ventures, Northwestern Mutual Capital, Omidyar Network, Homebrew Valuation $1.5B 30 C ON S UM E R C R E D I T R EMA I N S A N A R E A O F O P PO R T UN I T Y F O R T E C H S T A R T U P S Petal is an alternative credit card issuer with 100,000 pre-launch sign-ups as of October 2018. Petal targets the 65M Americans that are uncreditworthy or are “credit invisible” and do not meet the traditional qualifications for a credit line with a bank. Petal’s back-end bank partner is Web Bank. Petal uses an in-house algorithm that leverages machine learning and supplemental data (like income, short-term debt, and outstanding loans) to alternatively underwrite a consumer’s credit risk. Select Investors Ride Ventures, Rosecliff Ventures, Story Ventures, Valar Ventures, Afore Ventures, Brooklyn Bridge Ventures Last Funding $34M Series D // Q1’19 Valuation $107M 31 More cross-over cards to come from every corner UK only Select insurgent fintech startups and public contenders planning to launch credit and debit cards Credit Partner TBD DEBIT CREDIT PRIVATE FINTECH PUBLIC CONTENDERS VS. 32 Apple Card emphasizes privacy over perks Apple introduced the Apple Card in March 2019 as a pillar in its strategy to bet big on subscription services. Apple Card prioritizes security over discounts, keeping data & cash in the Apple ecosystem, and providing services that integrate seamlessly across its software and hardware stack, consistent with Apple’s broader strategy. Existing incumbents don’t have this. F R OM C A R D S T O A C C O UN T S , C O U L D A N A P P L E C H A L L E N G E R B A N K B E N E X T ? 33 MACRO SECTOR TRENDS WEALTH MANAGEMENT GLOBAL VC-BACKED FINTECH Q1 ’2019 34 Wealth tech deals came roaring back in Q1’19 VC-backed deals and financing trends to wealth tech startups, Q1’18 – Q1’19 ($M) $613.9 $926.0 $525.8 $469.0 $845.1 50 42 49 37 46 0 10 20 30 40 50 60 $(100.0) $100.0 $300.0 $500.0 $700.0 $900.0 $1,100.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 35 + Acorns grows to 5M customers with $1B in AUM A C O RN S I S A C T I V E L Y P U R S U I N G OMN I C H ANN E L P A R TN E R S H I P S F O R D I S T R I B U T I O N S E L E C T P A R TN E R S H I P S Jun’18 Feb’19 Feb’18 Jan’19 Select Investors NBC Universal, Blackrock, Paypal, Bain, Nyca, The Rise Fund, Sound Ventures, Greycroft, Point 72, e.Ventures Last Funding $105M Series E // Q1’19 Valuation $860M Q1’19 announcements: • Acorns took a strategic investment from NBC Universal • NBC Universal started creating financial literacy content for Acorns Grow as part of the investment • Acorns Spend debit card went live • To increase offline visibility, Acorns sponsored Roush Fenway Racing to partner with Nascar driver Ryan Newman 36 Stash adds 2.5M accounts and active investments S T A S H I S L O O K I N G T O D I V E R S I F Y I N V E S TM EN T O F F E R I N G Select Investors Union Square Ventures, Valar Ventures, Breyer Capital, Coatue Management, Entree Capital, Goodwater Capital Last Funding $65M Series E // Q1’19 Valuation $405M Q1’19 announcements: • Stash added “stock back” rewards, linked to its spending cards, which are fractional investments in diversified ETFs on a rotating basis • In one month, Stash fulfilled 500K rewards • Stash bank accounts and debit cards went live B AN K P A R TN E R 37 Early-stage wealth tech startups are diversifying investing beyond the robo-advisory stack in the US Select Q1’19 wealth tech deals Focus: Diversifying IRAs with alternative asset classes Q1’19 Funding: $2.8M Seed Select Investors: Sequoia Capital, Fondation Capital Focus: 1099 and gig-economy benefits platform Q1’19 Funding: $5.1M Series A Select Investors: NYCA, Khosla Ventures, Kindred Ventures Focus: Retirement planning and income distribution Q1’19 Funding: $1M Series A-II Select Investors: Inspired Capital, Anthemis, Point72 Focus: Financial healthcare and wellness benefits for employers Q1’19 Funding: $2.8M Seed Select Investors: PJC, TT Venture, Y Combinator 38 MACRO SECTOR TRENDS CAPITAL MARKETS GLOBAL VC-BACKED FINTECH Q1 ’2019 39 Capital markets tech deals grew but funding drops with shift to M&A deals in Q1’19 Global capital markets tech VC-backed fintech financing trends, Q1’18 – Q1’19, ($M) $1,188.2 $2,104.5 $1,213.6 $1,399 $1,031.4 80 60 55 55 60 0 10 20 30 40 50 60 70 80 90 $- $500.0 $1,000.0 $1,500.0 $2,000.0 $2,500.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 40 Morgan Stanley acquires Solium Capital for $900M to win underwriting business ahead of tech IPOs E Q U I T Y M ANAG EM EN T I S H E A T I N G U P W I T H T H E L A R G E S T D E A L T O - D A T E Valuation: $1B Potential opportunities for Morgan Stanley: • Cross-selling Solium’s clients into the wealth management business • Raising the investment bank’s underwriting business as the tech IPO market heats up • Solium acquired Capshare in 2017 which remains operational 41 Carta helps venture capitalists, as well as startup employees and other stakeholders, track and manage the shares that they own. It also helps companies manage other aspects of their stock, such as fair-market valuations and secondary sales. Carta's product becomes more useful as more startups stay private longer and have more complicated capitalization tables, though some of its customers have also gone public while continuing to use the service. The company has plans to expand to help venture capital firms' limited partners, such as endowments and pensions, manage their portfolios. Financial Management Startup Carta Is Raising $300M From A16Z At A $1.8B Valuation 42 Cap markets tech brings private markets out of the dark ages and protects startup employees Q1’19 Funding: $2M Seed // Fuel Ventures Focus: Capdesk is a private equity management platform designed to digitize and provide liquidity for the billions of pounds (GBP) of employee shares in unlisted European companies. Capdesk is similar to Carta’s initial software offering in the US and is one of a number of equity management software providers cropping up globally to help startups, VCs, and employees. Q1’19 Funding: $20M Series B // Citi, Nasdaq, Galaxy Focus: Symbiont is a blockchain company developing products in smart contracts and distributed ledgers for the capital markets. In February 2019, Templum partnered with Symbiont's Assembly for its regulated, end-to-end solutions for raising capital and secondary trading platform. Q1’19 Funding: $35M Series B // Munich Re Q2’19 Funding: Undisclosed Minority // BNP Focus: Forge, FKA Equidate, is a settlement and custody partner for investors and shareholders in the private markets. In March 2019, Forge acquired IRA services to expand into custody and reduce switching friction for users. In April 2019, Forge partnered with BNP Paribas to originate and distribute new investments with exposure to pre-IPO and private markets. LIQUIDITY CAP TABLE MANAGEMENT ISSUANCE + 43 MACROS SECTOR TRENDS INSURTECH GLOBAL VC-BACKED FINTECH Q1 ’2019 44 Insurtech funding surged on the back of 3 mega- round investments in Q1’19 Global insurtech VC-backed fintech financing trends, Q1’18 – Q1’19, ($M) $711.8 $556.4 $1,167.7 $800.6 $1,574.7 66 62 47 46 58 -5 5 15 25 35 45 55 65 75 $- $200.0 $400.0 $600.0 $800.0 $1,000.0 $1,200.0 $1,400.0 $1,600.0 $1,800.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 45 Mutual aid platforms take off in China to crowdfund medical coverage Q1’19 Funding: $74M Series B // Tencent, BlueRun Ventures Focus: Shuidihuzhu is a mutual aid platform in China that allows members to raise money for diseases that require high medical fees. Members pay a small upfront fee into a pool of funds that pays out when a member is diagnosed with a serious disease such as lung cancer. Shuidihuzhu also brokers health insurance policies to members. Most plan participants are from rural cities. Shuidihuzhu has paid out more than 400M yuan to more than 3,000 people to date. SHUIDIHUZHU XIANG HU BAO Launch: October 2018 by Ant Financial Focus: Xiang Hu Bao is Ant Financial’s mutual aid platform, which provides lump-sum payouts for 100 critical injuries or diseases based on payments collected from its members. The service, which is available to anyone 30 days old to 59 years old, has acquired over 50M customers in less than six months. Ant charges an 8% administrative fee for every payout and reportedly hopes to sign up more than 300M users within two years. 46 Mix of European insurtech startups raise growth financing in Q1’19 Q1’19 Funding: $45M Series B // DST Global, Index Ventures Focus: Alan is a Paris-based startup operating as a licensed private health insurer providing coverage beyond the basic reimbursements provided by France’s national healthcare system. Alan also provides digital tools such as a maps product to find nearby doctors. Alan grew from 5,000 policyholders to 27,000 in 2018, focusing on freelancers and small businesses. Q1’19 Funding: $125M Series B // Mubadala Ventures Focus: Wefox Group is a Berlin-based startup that owns Wefox, an insurance management app, and One, a digital liability insurer for personal insurance coverage. Wefox currently serves more than 400K customers and 1,500 brokers, with 80% of customers on the Wefox platform coming via brokers. Q1’19 Funding: $60M Series C // BVP, Accel Focus: Shift Technology is a Paris-based startup providing software tools to detect fraudulent insurance claims. Shift works with more than 70 global customers including CNA in the US, MACIF in France, and AXA in Spain. Shift is expanding into claims automation with a SaaS- based solution that augments existing processes and integrates into core systems. FRAUD HEALTH INSURANCE INSURANCE BROKERAGE & LIABILITY INSURER 47 MACRO SECTOR TRENDS REGTECH GLOBAL VC-BACKED FINTECH Q1 ’2019 48 Regtech saw drop in funding but slight recovery in deals in Q1’19 Global regtech VC-backed fintech financing trends, Q1’18 – Q1’19, ($M) $385.1 $450.6 $546.8 $686.8 $337.8 39 31 30 21 25 0 5 10 15 20 25 30 35 40 45 $- $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 49 A payday lender in disguise? New York investigates the Earnin app April 3, 2019 | UniCredit Bank AG hit with $1.3B fine by U.S. Justice Department April 17, 2019 | Regulators find compliance gaps R E G U L A T O R S C O N T I N U E T O C R A C K D OWN O N B O TH I N C UMB E N T S A N D S T A R T U P S 50 “We continue to be disappointed with Wells Fargo Bank N.A.’s performance under our consent orders and its inability to execute effective corporate governance and a successful risk-management program. We expect national banks to treat their customers fairly, operate in a safe and sound manner, and follow the rules of law.” March 15, 2019, OCC public rebuke of Wells Fargo Bank March 28, 2019, Tim Sloan, Wells Fargo CEO retired R E G U L A T O R S A R E MO R E EM B O L D E N E D T H AN E V E R 51 Startups fight crime and counter terrorism with AI and APIs Q1’19 Funding: $9M Series A Select Investors: Canaan, Broadhaven Regulations: AML, Fraud Focus: Beam helps fintechs, banks, broker- dealers, and cryptocurrency companies to streamline workflows, lower false positives, and centralize data to comply with regulations. The company’s API-based platform conducts transaction monitoring with the data and helps customers proactively identify suspicious activity. Q1’19 Funding: $7.5M Series A Select Investors: Jungle Ventures, Illuminate Regulations: AML, Reconciliation Focus: Tookitaki provides end-to-end machine learning applications for reconciliation. Tookitaki’s REST APIs and AI are auditable and scalable for compliance with financial services regulations. Q1’19 Funding: $30M Series B Select Investors: Index Ventures, Balderton Regulations: AML, CFT Focus: ComplyAdvantage supports a suite of plug-and-play cloud services including REST APIs, automated onboarding, and continuous monitoring for compliance risks. The company helps firms comply with regulations relating to sanctions, anti-money laundering (AML), terrorist financing (CFT), bribery, and corruption. 52 Next-gen regtech startups are combating identity fraud with biometric authentication and continuous monitoring Focus: Socure verifies digital identities by combining machine learning with trusted datasets to authenticate identities in real time. Socure provides services to lenders, card issuers, banks, e- commerce, and digital payments. In December 2018, Socure partnered with Alloy to offer financial institutions better customer “risk scoring,” aiming to reduce the number of false positives in fraud analysis. Feb’19 // $30M Series C Select Investors: Two Sigma, Santander, Flint Capital Focus: Onfido is a digital identity company that provides verification software for background screening and onboarding. Onfido uses machine learning to remotely validate a person's identity document and compares it with their facial biometrics. The identity can then be checked against international credit bureaus and watchlists. Apr’19 // $50M Series D Select Investors: Salesforce, SBI Group 53 MACRO SECTOR TRENDS PAYMENTS GLOBAL VC-BACKED FINTECH Q1 ’2019 54 Payments incumbents look to consolidate plumbing and infrastructure with record M&A deals Source: SEC FORM 8-K In January 2019, Fiserv announced its $41B acquisition of First Data Fiserv provides card-based solutions for banks and non-bank issuers. • Combined with First Data’s merchant acquiring services, FIS will touch end-to-end payments chains including card issuing and core processing, networks services, e-commerce, and integrated payments. • Consumers and merchants could benefit from the augmented network and consolidated distribution channels, tightened risk management protocols, and expanded card-based acceptance solutions. + 55 FIS acquires Worldpay in a ~$43B deal, the biggest fintech acquisition of all time In March 2019, FIS announced its $43B acquisition of Worldpay • FIS and Worldpay have complementary solutions and services encompassing financial institutions, issuing and acquiring services, and commerce. • Consumers and merchants will benefit from the combined omnichannel payment & multi- currency capabilities, robust risk & fraud solutions, and robust data analytics. • Worldpay has been adding key e-commerce partnerships including supporting Amazon Pay outside of Amazon’s marketplace. VS. 56 K L A R N A I S E X P A N D I N G G L O B A L L Y W I T H A H Y B R I D P A YM EN T S , C R E D I T , & B A N K I N G S U I T E Select Investors Permira, H&M, Sequoia Capital, Permira, DST Global, QED Last Funding $108M Private Equity // Q1’19 Valuation $2 - 2.5B Klarna is a Sweden-based alternative payments platform that aims to provide a frictionless buying experience to buyers and sellers. 2019 announcements: • Raised $108M in private equity from Permira and Sequoia in April 2019 • Launched a new open banking platform that links to 4,300 banks and a global authentication platform • In Q1’19, Snoop Dogg angel invested and was the center of a new marketing campaign • Partnered with Canada’s PayBright, adding another 4,000 merchants to the platform 57 Fintech in Africa is growing, payments and lending remain the top targets for deals 58 Africa’s payments landscape is evolving similarly to other regions through VC deals and M&A Q1’19 Funding: $150K Seed Select Investors: Y Combinator Focus: Wallet.ng is a digital payments platform that aids transactions by allowing people to send and receive money and also make payments using just their phone numbers. Q1’19 Update: Similar to the Fiserv and FIS deals, India’s FSS is looking to frontier markets to grow their merchant acquiring business. In March, FSS made a minority investment in Africa’s Ecentric Payment Systems, taking a 46% share of the company. Q1’19 Funding: $5M Series A Select Investors: Y Combinator, Khosla Ventures Focus: Kudi provides a mobile app that offers bill payment through messaging. Features include bill payment, bill reminders, airtime purchase, and funds transfer. 59 MACRO SECTOR TRENDS BANK TECH GLOBAL VC-BACKED FINTECH Q1 ’2019 60 Community lenders say their tech providers aren’t always helping them compete for deposits. Little known outside the banking world, but their infrastructure now makes up much of the modern banking system’s financial plumbing, especially for smaller banks. “The cores” provide the legacy technology behind everything from keeping track of customer deposits to powering mobile apps. The three biggest core providers today do business with 90% of US banks with less than $1B in assets. Frustrated by the Tech Industry, Small Banks Start to Rebel Against Legacy Core Providers FIS, Fiserv, & Jack Henry 61 Next-gen bank cores pick up funding and fintech clients but face high barriers to break into networked banks Last Funding: $5.4M Series B-II Q2’18 Select Investors: Insight Venture Partners 2019 Developments: Nymbus is breaking into de novo banks, or newly chartered banks. Moxy, a new DC-based de novo bank, received a conditional charter in January 2019 and announced the selection of Nymbus’ core banking suite. Nymbus’ suite of services includes SmartCore and SmartLaunch, a full-service and standalone digital brand alternative. Select Investors: ABA, Accenture, First Data Ventures, Live Oak Ventures, SunTrust Banks, T.N. Incorporation, Woodforest National Bank Focus: Finxact is developing an enterprise-class public cloud/private data Core-as-a-Service platform with a completely open banking API. The Finxact Core will allow banks to deliver new services for omnichannel consumers. Last Funding: $30M Series A Q1’19 + 62 Europe sees utility players capitalize on open banking tailwinds and bank demand for go-to-market solutions Focus: Mambu is a SaaS banking platform that powers digital financial services. The company provides flexible, banking architectures that aim to allow its clients to operate like tech companies rather than banks. The company is based in Germany. Select Investors: Acton Capital Partners, Bessemer Venture Partners, Point Nine Capital, CommerzVentures Feb’19 // $34M Series C Focus: 10x offers a suite of APIs covering process core automation, compliance reporting, security, and analytics. 10X had a false start in 2018 after losing its largest prospect, Virgin Money. The company got a fresh injection of funding from Nationwide, its new marquee client. Select Investors: Nationwide Building Securities, Ping An Ventures Mar’19 // $19.7M Series B Select customers: + 63 Ant Financial has accelerated the roll-out of services that share its technological capabilities with financial institutions. Ant is partnering with Jiangsu-based Hoperun and unveiled its Distributed Core Banking Platform (DCBP), a next generation banking product designed to help financial institutions shift from transaction-oriented to customer-oriented and tackle digital challenges, including distributed development, financial product management and accounting liquidation. To date, Ant Financial has provided more than 100 technology products and solutions and collaborated with more than 200 service partners. Ant Financial Launches Distributed Core Banking Platform with Hoperun Information Technology From financial super app to full-stack banking, could a charter be next? 64 Q1’19 global fintech financing trends A P P E N D I X : 65 $3.3 BILLION 170 DEALS U S F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N Q 1 ’ 1 9 : A C R O S S 66 Q1’19 US fintech deals rebounded after three consecutive dips, but remained below Q1’18 levels US VC-backed fintech financing trends, Q1’18 – Q1’19 ($B) $2.5 $3.4 $3.0 $3.4 $3.3 212 180 169 149 170 $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 67 US early-stage fintech deals rebounded but funding dropped in Q1’19 US early-stage VC-backed fintech financing trends, Q4’17 – Q4’18, ($M) US saw a fresh crop of early-stage startups raise funding in Q1’19 Early-stage deals took 91 of the 170 deals in Q1’19, representing 54% of quarterly deals. In Q4’18, early-stage deals took 79 of 149, or just over 53% of quarterly deals. Though the total number of deals grew, early-stage deals as a percentage of the total were flat QOQ. The quarter continued to see mega-rounds go to scale ups like Acorns, Stripe, Toast, Chime, among others. $624 $618 $518 $678 $491 125 90 85 79 91 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 68 New York is closing in on California as a fintech hub New York vs. California VC-backed fintech deals, Q1’18 – Q1’19 California deals dropped to 5-quarter low California saw deals drop to 51 in Q1’19, down 43% compared to Q1’18. New York saw 44 deals in Q1’19 which was flat compared to Q1’18. The US saw one new fintech unicorn birth, Chime, a San Francisco-based challenger banking startup. 90 67 59 62 51 44 39 38 31 44 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 California New York 69 $875 MILLION 127 DEALS A S I A F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N Q 1 ’ 1 9 : A C R O S S 70 Fintech funding in Asia fell to 5-quarter low in Q1’19, down 59% from Q1’18 Asia VC-backed fintech financing trends, Q1’18 – Q1’19 ($M) $2,159 $16,204 $1,929 $2,613 $875 131 157 147 119 127 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 *Spike in Q2’18 was driven by Ant Financials’ record breaking $14B round 71 India tied China as a fintech deal hub in Q1’19 China vs. India VC-backed fintech deals, Q1’18 – Q1’19 China fintech deals fell off in Q1’19 following regulatory tightening on online lending India and China both saw 29 deals in Q1’19. China saw deals drop to a 5- quarter low. India deals were flat compared to the same quarter a year prior. 50 76 71 49 29 29 28 22 18 29 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 India China 72 $428.2 $454.3 $397.6 $225.1 $285.6 $1,544.5 $1,451.0 $1,091.8 $1,829.7 $192.1 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 India beat China as a fintech funding hub in Q1’19 China vs. India VC-backed fintech deals, Q1’18 – Q1’19 India overtook China in funding as China fintech funding fell off in Q1’19 India saw funding top $286M while China only saw $192M in Q1’19. China fintech funding hit a 5- quarter low. India China 73 $1.7 Billion 102 DEALS E U R O P E F I N T E C H V C - B A C K E D E Q U I T Y F U N D I N G I N Q 1 ’ 1 9 : A C R O S S 74 Fintech deals in Europe decline, as funding hits $1.7B in Q1’19 Europe VC-backed fintech financing trends, Q1’18 – Q1’19, ($M) $1,083 $942 $805 $804 $1,713 82 86 103 120 102 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 75 Europe overtook Asia in funding in Q1’19 Global VC-backed fintech funding by continent, Q1’18 – Q1’19 , ($M) *Spike in Q2’18 was driven by Ant Financials’ record breaking $14B round North America Europe Asia $2,595 $3,484 $3,121 $3,572 $3,492 $2,159 $16,204 $1,929 $2,613 $875 $1,083 $942 $805 $804 $1,713 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 North America Asia Europe 76 The UK leads as Europe’s top fintech market for funding, despite Brexit uncertainty UK vs. Germany VC-backed fintech funding, Q1’18 – Q1’19 ($M) The UK and Germany went head-to-head in funding in Q1’19 The UK led as the top fintech market in Europe with $645M invested across 42 deals. Germany was the second top market in Europe, with $588M invested across 15 deals. Germany saw the largest funding round in Europe in Q1’19, a $300M investment to N26. The deal valued the challenger bank at $2.7B, making it Germany’s first fintech unicorn. $259.7 $130.4 $175.9 $168.9 $588.4 $552.0 $531.2 $462.5 $395.6 $645.0 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 UK Germany The image part with relationship ID rId2 was not found in the file. #AhaCBI Most active fintech investors 78 The most active fintech VCs from Q1’18 – Q1’19 By unique fintech company investments (new or follow-on) Rank Investor Select Fintech Investments 1 2 3 3 5 79 The most active fintech VCs from Q1’18 – Q1’19 By unique fintech company investments (new or follow-on) Rank Investor Select Fintech Investments 5 7 8 9 9 9 80 Methodology CB Insights encourages you to review the methodology and definitions employed to better understand the numbers presented in this report. If you have any questions about the definitions or methodological principles used, we encourage you to reach out to CB Insights directly. Additionally, if you feel your firm has been under-represented, please send an email to info@cbinsights.com and we can work together to ensure your firm’s investment data is up to date. What is included: What is excluded: ― Equity financings into emerging fintech companies. Fundings must be put into VC-backed companies, which are defined as companies who have received funding at any point from venture capital firms, corporate venture groups, or super angel investors. ― Fundings of only private companies. Funding rounds raised by public companies of any kind on any exchange (including Pink Sheets) are excluded from our numbers, even if they received investment by a venture firm(s). ― Only includes the investment made in the quarter for tranched investments. If a company does a second closing of its Series B round for $5M and previously had closed $2M in a prior quarter, only the $5M is reflected in our results. ― Round numbers reflect what has closed — not what is intended. If a company indicates the closing of $5M out of a desired raise of $15M, our numbers reflect only the amount which has closed. ― Only verifiable fundings are included. Fundings are verified via various federal and state regulatory filings, direct confirmation with firm or investor, or press release. ― Previous quarterly VC reports issued by CBI have exclusively included VC-backed rounds. In this report, any rounds raised by VC-backed companies are included, with the exceptions listed. — No contingent funding. If a company receives a commitment for $20M subject to hitting certain milestones but first gets $8M, only the $8M is included in our data. — No business development / R&D arrangements, whether transferable into equity now, later, or never. If a company signs a $300M R&D partnership with a larger corporation, this is not equity financing, nor is it from a venture capital firm. As a result, it is not included. — No buyouts, consolidations, and/or recapitalizations. All three of these transaction types are commonly employed by private equity firms and are tracked by CB Insights. However, they are excluded for the purposes of this report. — No private placements. These investments, also known as PIPEs (Private Investment in Public Equities), are excluded even if made by a venture capital firm(s). — No debt / loans of any kind (except convertible notes). Venture debt or any kind of debt / loan issued to emerging startup companies, even if included as an additional part of an equity financing, is not included. If a company receives $3M with $2M from venture investors and $1M in debt, only the $2M is included. — No government funding. Grants, loans, or equity financings by the federal government, state agencies, or public-private partnerships to emerging startup companies are not included. 81 WHERE I S ALL TH IS DATA FROM? The CB Insights platform has the underlying data included in this report app . cb i n s i gh t s . com/s i gnup
