A Rebound for Fintech Investment

This article by Louis Lehot and Andre Thiollier originally appeared on FOLEY on September 5, 2024: A Rebound for Fintech Investment

Venture Capital investment in retail fintech rebounded in Q2, according to a new report from PitchBook. Their Q2 2024 Retail Fintech Report shows deal value for this sector coming in at $4.5 billion for the quarter, an impressive 270.8% jump from Q1. Their analysts point to large fundraising rounds for lending, credit, and banking startups as the driver for this boost.

Below, we look at some of the other highlights from their analysis.

Deal Value, Count, and Subsector Investment

• The $4.5 billion in VC investment was spread across 168 deals, compared to $1.2 billion and 139 deals in Q1. YoY analysis shows deal value rose 193.4%, but deal count dropped 1.2%.
• Of total fintech VC deals in Q2, retail fintech transactions made up 45.7%. Pitchbook points out that this is the highest allocation this sector has seen since the first quarter of 2021.
• The subsectors that attracted the most investment included alternative lending and credit & banking, but their analyst notes that debt funding is common for alternative lenders, which leads to higher deal values for this area.
• For pre-seed and seed deals in Q2, many were in wealthtech, which includes startups in personal finance management and alternative investment.

Deal Size

• By the end of Q2, the YTD median deal size for retail fintech companies was $3.3 million. That is up 5.9% from the media size in 2023 of $3.1 million.
• At the pre-seed and seed stage, median deal sizes were up 24.4%, reaching $2 million.
• Venture growth companies saw an average of $31.9 million, a jump of 38.8%.
• However, the median for early-stage companies dropped 13% to $3 million, and the late-stage median was down 11.2% to $6 million.

Pre-Money Valuations*

• The sector’s YTD median pre-money valuation at the end of Q2 was $33.7 million. In 2023, it was $15.8 million, an increase of 112.7%.
• The median pre-seed and seed-level valuation was $9.9 million, up 6.6%.
• At the early-stage level, startups saw a median valuation of $32 million, an 80.9% jump.
• Late-stage deals had a median value of $60.6 million, a jump of 51.9%, and venture-growth deals rose 66% to a median value of $510 million.

*It is important to note that PitchBook says that valuation data is sparse as companies raising down rounds tend to keep their valuations undisclosed. This can impact the pre-money valuation trends.

As Q2 data has come out in a variety of areas, we have seen more positive news and signs of a rebound overall. Hopefully these positive gains coupled with the predicted interest rate cuts will allow for an even greater recovery as we move into the fall.