Fintech funding: investment flows in the first quarter of 2021

Yes, there are two weeks left until the end of the first quarter of 2021. And very interesting investment trends have emerged over this period. They are expected to extend for the rest of the quarter. The CB Insights research “State Of Fintech Q1'21 Preview: Investment Trends to Watch” helped to define the results of venture capital investments in January and February. Well, let’s take a view on preliminary fintech funding trends in Q1`21.

  1. The growth in the global fintech funding

The volume of global fintech funding has surpassed $13.4B during the first 2 months of 2021. Global fintech funding is expected to grow 39% quarter-over-quarter in Q1`21, even after excluding Robinhood’s emergency funding raise amounting to $2,4B in addition to $1B raised a week earlier. The fintech company needed funds to support its operation amid a stock market frenzy, induced by the high volume of trading in companies` stocks such as GameStop. The startup’s CFO said this round of funding would help the company to expand its activity. That will help the company to satisfy an incredible growth observed and the demand for platform services.

At the same time, $13.4B (24% growth quarter-over-quarter) is already the highest rate of global fintech fundraising in a quarter, since the second quarter of 2018, when only the fintech giant Ant Group raised $14B. It is worth noting that, according to data as of the end of February, the seed/angel round share continues to decline in the Q1`21.

2. Fintech funding geography

This quarter’s funding boom is distributed across major regions — North America, Europe and Asia. The fintech fundraising in Asia exceeded all rates since the Q2`2020, amounting to $2.6B. This metric has already reached a record high of $2.9B in Europe. North America isn’t falling behind and has set the new record for the quarterly funding of fintech companies — $7.2B — driven by Robinhood fundraising. And these results are based on the data of only the first two months. Other markets, including countries in Africa, South America and Australia, have not yet registered significant VC flows this quarter, with $651M in funding.

3. Mega rounds as the most popular direction with investors in Q1`21

In the first two months of 2021, mega-round totals have reached new record rates for both the number of deals and the volume of funds raised. Let me remind you that mega-rounds are rounds worth $100M+. So the number of mega-rounds at the end of February amounted to 33 deals — 15 concluded in the USA, 5 in the UK, 3 in China and 3 in India, 1 in Brazil and the rest in several other countries.

In January-February this year, the mega-rounds` share of global fintech funding amounted to 71% , and the number of rounds worth $100M+ reached a record 8% of the total deals during these two months.

Despite the ambiguous and rather difficult 2020, the volume of global fintech funding in a quarter wasn’t below $10B during this period, and in some instances even showed growth compared to the corresponding quarters in 2019. This confirms the fields’ resilience and high-demand.

There is a tendency towards an increase in the global fintech funding, but at the same time a reduction in the number of deals, due to the popularity of the more mature and well-formed projects with the investors.

CEO of the international payment system LEO, the shareholder of IBOX Bank