Even more risky and long-term bets like space tech and biotech appear to be doing well in today’s risk-on startup fundraising market. Edtech took off during the pandemic, software in general got a boost, and even more risky and long-term bets like space tech and biotech appear to be doing well in today’s risk-on startup fundraising market. Fintech, or financial technology, has done better than any other sector or specialization in the startup world.
Fintech startups have raised staggering amounts of money all over the world, with neobanks, payments companies, new consumer-facing lending services, cryptocurrency on-ramps from traditional banking, trading apps, and other sub-sectors raising tectonic rounds from investors eager to put their money to work in the craze. According to the CB Insights 2021 State of Venture Report, global venture capital reached a new high of $621 billion in 2021. That is more than double the $294 billion budgeted for 2020.
Global fintech funding hit a new high of $131.5 billion in 2021, with 4,969 deals. In 2020, $49 billion will spent on 3,491 agreements. As you can see, capital invested in fintech startups expanded substantially faster than overall deal count in 2021, resulting in higher rounds on average. Financial technology startups raised one out of every 5 venture capital dollars last year, or 21 percent, according to the CB Insights statistics. Fintech funding increased at a feverish rate in the fourth quarter of 2021, reaching $34.9 billion, second only to $36.6 billion in the second quarter. There were 1,256 deals in Q4 compared to 1,224 in Q2.
To put those figures into perspective for our monkey brains, 14 fintech agreements announced every day in the fourth quarter, totaling $387,777,777 every 24 hours, including weekends, holidays, and other non-working periods. That is a lot of action in a short amount of time. The fintech venture industry is so large that its contours are similar to those of the venture capital market. For example, the United States led in fintech financing in the fourth quarter, as well as total venture capital dollars for the year.
In terms of fintech investment, the United States followed Asia and Europe, with $18.2 billion invested in US fintechs compared to $8.2 billion and $5.6 billion in Asia and Europe, respectively. While still lagging behind the rest of the world, Latin America finished in fourth with $1.9 billion invested in fintech businesses. (Note: LatAm fintechs received $4.2 billion in funding in Q3; lower figures are more volatile from quarter to quarter.)
However, those are only the top-line numbers. On a round-by-round basis, what happened? Let us a discussion about it. Deal size on average, Last year, the average and median fintech deal sizes set new highs. The average fintech startup round in 2021 was $32 million, up substantially from $18 million in 2020 (almost twice!). Meanwhile, the median deal size was $5 million in 2018, up from $4 million in 2020, a 20 percent increase.