Signs of a Chill in Fintech Funding?

  • Philip Ryan
  • April 28, 2016
  • 2

© Can Stock Photo Inc. / kvkirillovFintech funding is booming. The first quarter of 2016 may have seen no IPOs, but it saw more funding than ever — $5.3 billion, 67% more than the same period last year, according to Accenture.

But there are signs a chill may be in the air.

At the Empire Startups Fintech Conference this week in New York, Matt Harris, managing partner at Bain Capital Ventures, battled paint fumes and a largely uncaffeinated crowd to deliver good news, but also a warning: While overall fintech funding is increasing, smaller fundings are on the decline.

Overall funding for 2015 hit $9.1 billion, according to data from Bain Capital. That’s triple the $2.7 billion raised in 2013, and the average deal size has tripled in that period as well. But there is one area where 2013 is superior to 2015 — more smaller fundings. A detail from a Bain Capital slide illustrating this is below.

bcv_mh“Smaller fundings are the seed corn of the industry,” Harris said, noting that when these begin to dry up, it is a sign that the rest could follow. In other words, we could be seeing fintech start to reverse itself — but it hasn’t yet.

But market watchers should not ignore Harris’s warning. Yes, the mega fundings are great, but not as good as a sign for the future of fintech as a large number of smaller deals.

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism. He can be reached at pryan@royalmedia.com.

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