DealmakingFintechM&A / Funding

2020 saw a record number of fintech mega-rounds

Mega-rounds represented 54% of global fintech funding in 2020 so far

For obvious reasons, 2020 will be a year for the record books. And that’s certainly the case for the number of $100 million fintech mega-rounds raised this year by privately held VC-backed companies.

In a Dec. 17 preview of its report summarizing global fintech funding in 2020, data and analytics provider CB Insights says the 97 fintech mega-rounds tallied as of Dec. 12 set an annual record. Fifty-four of those deals involved U.S. companies. The previous record was 92 mega-rounds in 2019.

In an email newsletter, CB Insights noted that in fintech, the “pandemic couldn’t stop the mega-deal.”

Here are four of the major mega-round recipients in 2020, all of which are IPO candidates:

  • Paytech company Klarna, which pulled in $685 million.
  • Wealthtech platform Robinhood, which garnered $660 million.
  • Digital bank Chime, which collected $485 million.
  • B2B payments unicorn AvidXchange, which hauled in $388 million.

This year’s mega-round phenomenon — most notably multiple mega-rounds raised by later-stage fintechs like Klarna and Robinhood raised — “shows the tremendous investor appetite for large and mature fintech companies,” CB Insights says.

“Fintech isn’t just a hip portmanteau anymore,” research and consulting company Forrester noted in November. “It’s a category of startups and fast-growing companies that has disrupted markets and incumbent firms around the world, attracting over $30 billion in funding every year for five straight years.”

Overall, mega-rounds represent 54% of global fintech funding in 2020 yet just 5% of fintech deal activity, according to CB Insights. That’s similar to the figures for 2019.

While the number of fintech mega-rounds climbed to an all-time high in 2020, global funding and deal activity did not, CB Insights data shows. At the current pace, fintech funding is on track to decline by 2.5% in 2020, with deal activity projected to drop by 14%.

This year is projected to end with $41.9 billion in global fintech funding, shy of the $43 billion raised in 2019 and the $48.3 billion raised in 2018, CB Insights says. In North America, total funding for this year is expected to land at $21.1 billion, down from $20.6 billion in 2019.

CB Insights predicts fourth-quarter fintech funding will reach $10.14 billion, the lowest total of any quarter in 2020 and slightly below the fourth-quarter total in 2019.

This year’s share of seed and angel funding appears to be headed to 37% for the year, down from 42% in 2019, according to CB Insights. However, the share of Series B rounds is expected to rise from 16% in 2019 to 19% in 2020.

As for deal activity, CB Insights envisions the 2020 total winding up at 1,974, down 14% from 2,295 deals in 2019. Still, the firm expects the fourth quarter to close with 512 deals, the highest total since the first quarter of 2020. The projected quarterly total points to a bounceback in deal volume since the World Health Organization classified the coronavirus outbreak as a global pandemic in March.

“As the COVID-19 pandemic continues to create uncertainty, many fintechs are under stress on a number of fronts. But, as the broader economy shifts from ‘respond’ to ‘recover,’ new opportunities may be created for some fintechs,” consulting giant Deloitte observed. “A key question is how fintechs may leverage their unique assets and skills to seize new opportunities in the future. It could be an opportune time to think big and act boldly.”

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