Another active investing quarter puts 2018 on track to become the strongest FinTech investing year so far

Q3 2018 saw some relatively large-sized deals in the specialized FinTech space globally. While most deals were led by Private Equity and Venture Capital managers, there were also deals led by strategic corporates looking to build out their capabilities in terms of functions and geographies. The global market also noticed the rise in high value deal-activity in Emerging markets such as Israel via investment activity in ThetaRay and Behalf, and India with Freshworks raising USD 100M. The remaining part of 2018 will contribute to make it a big year for FinTech investments, considering that by June 2018, the total FinTech investments had already surpassed 2017’s full-year number.

Looking specifically at the biggest deals of the quarter, there were a few things that stood out. First, strategic deals are no longer solely about acquiring companies to increase footprints and capabilities, but instead are also now a channel to grow business via the acquired companies. Visa did this by issuing virtual Visa cards for all of Behalf’s business customers to extend credit, and similarly Nationwide Insurance used it’s investment into BlueVine to further promote it’s own insurance products. Second, while many deals saw investments from new investors, there was also a significant activity in terms of existing-investors re-investing in their portfolio companies. Third, there was a clear trend in investing being skewed towards speciality FinTech companies versus those who are “generalists” across different areas. In fact all of Q3’s biggest deals were in speciality companies. Fourth, the co-investing model seems to be gaining traction and allows for companies to raise large sums of money and at the same time get access to a variety of investors with different expertise and relationships. This model will continue to grow and dominate the investing space going forward. Lastly, apart from the diversity in FinTech types and sub-sectors, there is also a rising diversity in kinds of investors participating in FinTech investments. Traditional investor types such as banks and insurance companies are no longer the only corporates involved due to the rise of other corporates investing in FinTech to in order to enhance customer experiences and ease-of-use.

Enigma raised USD 95M from existing investors such as Comcast, Crosslink, Two Sigma combined with fresh rounds from new investors led by NEA. The firm will use the new funds to enter Insurance and Life Sciences verticals, expand capabilities with their knowledge graph technology, and build out new teams and offices.

Behalf’s capital-raise from Visa was both financial and strategic. Apart from the USD 100M funding, Visa will provide Behalf’s business customers with Visa Virtual cards that will give customers instant extended credit financing options on top of what they already have. This deal is also in line with Visa’s commitment to investing USD 100M in FinTechs in 2018.

Deposit Solutions raised USD 100M worth of new funds from existing and new investors, finally valuing the company at USD 500M. By this point the company has already raised USD 140M in funding since inception. The funding will be used to enter new markets such as Switzerland, new parts of Europe, and other emerging markets around the World.

BlueVine raised a total of USD 72M between two different rounds from a wide-range of investors including Microsoft’s venture fund and Nationwide Insurance’s venture arm. Nationwide’s investment decision was strategic and in-line with their own Insurance-business philosophy of ensuring customers are financially secure and well-taken care of, similar to what BlueVine is focused on.

Freshworks raised USD 100M valuing the company at USD 1.5Bn making it India’s newest unicorn. The funds will be used to help the India-based company to expand globally and also enhance its SaaS platform. The Indian market predicts this to be the company’s last private-capital raise amidst speculations for the next raise being via an IPO.

ThetaRay raised USD 30M, bringing the total amount raised so far to USD 60M. The company has been successful in riding the recent data-threat wave that concerns companies around the World in terms of potential loss of important and confidential data.

 

by Sahil Anand
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