Fintech was a key startup story over the past few quarters, with major players in the genre lifting titanic rounds to mind-blowing ratings. Consider companies like Robinhood, and its epic capital this year was propelled by huge revenue growth, or Chime, which also raised huge sums as it rode a favorable wind provided by the savings and investment boom.
The Exchange explores startups, markets and money. Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.As you can imagine, all those mega-deals added up. According to data collected by CB Insights on the fintech space in the third quarter, 60% of all capital raised by financial tech startups came from just 25 rounds worth $ 100 million or more. Adding to the trend for businesses to get bigger - and later as unicorns age without moving to public markets - the same report found that $ 100 million-round fintech investments grew 24% over the second quarter, while space investments from smaller deals fell by 16% over the same time frame.
The overall volume of fintech deals decreased by 24% compared to the third quarter of 2019, for a total of 451 global deals. But dollars invested in fintech startups climbed once again to $ 10.631 billion, the biggest result so far in 2020 and the second-best tally for the quarter since mid-2018.
Oddly, it was the bottom, as well as the top of the market, that gave the best. As we have seen, late-stage money was flowing. But, in particular, the number of smaller venture rounds - those marked as seed or angel - grew by 20% from Q2 2020.
Maybe the next unicorn crop is being founded?
Within the CB Insights data there are a few trends worth investigating, including what's happening with venture capital investments in payment-focused startups, how the IPO market could impact insurtech investments, and how both wealth management startups like Robinhood and banking startups like Chime they are going as cohorts.
The data is fascinating, so let's get into the state of fintech investing today.
Big trends, bigger dollars
Today we focus on four mega trends, but I wanted to start pointing out that African fintech startups have seen what appears to be their all-time record in deal count at 14. This was from 11 in Q2 2020 and nine in Q1. I'm working to pay more attention to the African tech scene and those numbers have stood out.
As the tally of fintech deals declines in major VC markets - North America, Europe, Asia - it is increasing in Africa and Latin America, something to keep an eye on.
Now, let's move on to our four mega trends.
Payments
Payments startups like Stripe and Finix get their share of the stocks, but they represent only a fraction of the total volume of venture capital investments their industry absorbs.
According to CB Insights, venture capital investments in payments startups increased in the third quarter of 2020, climbing to $ 3.959 billion from $ 2.379 billion in the second quarter of 2020 and $ 2.927 billion in the third quarter of 2019.
Aside from an anomalous final quarter in 2019, investments in payment-centric startups have been pending steadily for some time. Because? PayPal's earnings offer a partial explanation. As we reported yesterday after the consumer payments giant reported its performance in the third quarter:
