While Nubank’s massive Series G round and Klarna’s $40bn valuation may have secured the most headlines last week, CyberTech ventures bagged the most capital injections.
Last week, FinTech Global reported on 33 funding rounds completed by FinTech businesses from around the globe. Looking closer at them, it’s clear that there are some subsectors in the industry to keep a closer eye on cybersecurity, BNPL enterprises and challenger banks.
Latin American FinTech giant Nubank continues to wow the rest of the FinTech industry. The decacorn dominated the headlines last week after securing a $750m investment round and a $30bn valuation led by Warren Buffett’s Berkshire Hathaway. For comparison, US rival Chime achieved a $14.5bn valuation in September 2020 whereas UK rivals Revolut and Monzo are worth $5.5bn and $1.2bn respectively. Elsewhere, reports in October suggested that German N26 may be looking to raise a new funding round, pushing its valuation to $3.5bn.
The sector has indeed gone from strength to strength in recent years, having established several big unicorns. In fact, some researchers estimate that the global neobank market will grow from being worth $20.4bn in 2019 to reach a value of $471bn by 2027.
Moreover, the WealthTech sector as a whole is en route for its record year of funding since 2017. WealthTech companies raised $6.6bn across 162 deals in Q1 2021 with Robinhood completing a massive $3.4bn funding round, according to FinTech Global’s own research. The top ten WealthTech deals in the first three months of the year – including Robinhood, Nubank and Starling Bank – collectively raised just over $5.1bn, making up 77.2% of the overall investment in the sector during the quarter.
But, it is important to recognise that everything is not just hunkydory among challenger banks. Looking at the more recent trends in the sector, in the UK, the three leading neobanks – Revolut, Monzo and Starling Bank – have all reported gigantic losses over the last year. Those losses and the raging pandemic could have been behind the fact that the global WealthTech funding had a slow start to 2020. Only $3.3bn was invested in the first six months of 2020, representing a 41% decline compared to the capital raised in the preceding two quarters. Although, the WealthTech sector seemingly bounced back.
The meteoric rise of Nubank also highlights the growth of the Latin American space. FinTech investment growth in the region continued unabated despite the coronavirus-caused economic uncertainty. Back in 2016, the FinTech ecosystem in Latin America attracted $350.4m in total across 118 funding deals. Companies in the region raised more than $2.8bn last year, a growth of 4.65% year-on-year compared to 2019. Fast-forward to 2021 and that figure had jumped to a record-breaking $1.13bn just in Q1 of this year, according to FinTech Global’s research.
Brazil continues to lead the funding round league in the region, with five out of the ten biggest deals raised in Q1 2021 being from the country. Apart from Nubank, those rounds include Recargapay, Loft, Open Co and Trademaster.
However, while Nubank may have stolen most of the thunder last week, BNPL giant Klarna was not far behind with its mammoth $639m round giving it a valuation of over $40bn. The valuation helped the Snoop Dogg and Lady Gaga-backed firm become the highest valued FinTech in Europe. It was ousted from the throne in January when Checkout.com achieved a $15bn valuation. The round will further fuel the development of its buy now pay later platform. This further highlights the rise of the BNPL space.
The success of this market segment has been a long time coming, with it reaching a boiling point as more BNPL startups continue to mushroom across the world. San Francisco-based Affirm went public and began to trade shares on the Nasdaq. Other success stories include Zilch exiting stealth in September 2020 and reeling in an $80m round in April, Tamara scoring $6m in its seed round, PayPal launching its own BNPL service, Danish neobank Lunar announcing that it would use its latest funding round to launch a similar service, UK-based Butter which hauled in £15.8m in April and Sunbit which graduated to the unicorn club after its $130m Series D last month.
Market experts believe the space is only set to grow. A Bank of America survey predicted in December that apps such as Affirm, Afterpay, Klarna and PayPal were poised to grow between ten and 15 times by 2025 “to eventually process between $650bn and $1trn in transactions.” This trend seems to be gaining much popularity as the global BNPL market is projected to expand from $7.3bn in 2019 to circa $33.6bn in 2027 according to a report from Coherent Market Insights.
The rise in BNPL solutions came after the Covid-19 pandemic where customers could purchase without the pressure of immediate payment.
Other BNPL startups which raked in millions last week include Hokodo and Kafene. It’s important to note that these funding rounds continue to escalate despite the sector being in crosshairs with regulators including UK’s FCA and MAS who are concerned that the scheme encourages consumers from taking on too much debt.
Apart from that, we noticed the regular smattering of cybersecurity startups raising capital that we have gotten accustomed to in these roundups since the outbreak of Covid-19 emboldened many cybercriminals. Continuing with a huge win last week, the sector witnessed Trulioo securing the third biggest funding round of the week by adding an additional $394m to its war chest. The investment comes on the back of industry experts having said that the Covid-19 crisis would be good for the cybersecurity sector as more cybercriminals have tried to leverage the pandemic to launch different types of hack attacks.
Startups such as UpGuard, Aura and Cyber Guru were among others which raised significant rounds last week. Enterprises around the world have upped their investment into their digital defences as IT professionals have pushed cybersecurity to the top of their priorities, which could explain why many cybersecurity companies have enjoyed reasonably big funding rounds.
“The unprecedented shift to remote working from March resulted in strong demand for endpoint security to protect new company-deployed notebooks, as well as consumer-owned devices used as part of business continuity measures,” said Matthew Ball, chief analyst at Canalys.
However, Canalys’ recent research also predicted that the cybersecurity boom wouldn’t last once top executives started holding onto their purse strings a bit tighter to enable them to ride out the global health crisis.
That being said, others believe that the sector is expected to grow further over the next few years. In fact, the global industrial cybersecurity market size is expected to reach $22.8bn by 2026, according to recent Reportlinker.com research. Similarly, recent research suggested that a third of US-based bankers believe cybersecurity will be one of their top concerns in 2021 as they continue to digitalise their offering.
FinTech Global’s own research shows that investment into the sector expanded as total funding grew at a CAGR of 53.9% from $1.7bn to just over $6.2bn at the end of last year. An increased share of total funding came from deals over $75m which made up 64.5% of the total capital invested in the sector in 2020.
With that being out of the way, let’s look closer at the 33 FinTech funding rounds we reported on in the last week.
Nubank nets $750m at a $30bn valuation
Warren Buffett’s Berkshire Hathaway invested $500m in Brazil’s Nubank, giving the fast-growing fintech a big vote of confidence as it seeks to widen its footprint across Latin America. Furthermore, the neobank raised an additional $250m from a series of other investors.
Other participants in the round included Sands Capital, Canada Pension Plan Investment Board, MSA Capital, Advent’s Sunley House Capital, and Brazilian asset managers Verde Asset Management and Absoluto Partners.
The new investments give Nubank a $30bn valuation, up from $25bn at the time of its previous fundraising round. Nubank, which has 40 million clients, plans to use the proceeds to fund its international expansion to Mexico and Colombia, launch new products and services and hire more employees.
Klarna gains quadradecacorn status after $639m round
Swedish-based BNPL giant Klarna raised more than $639m in a new private fundraising round, led by Japan’s SoftBank, boosting its valuation to almost $46bn. Existing investors Adit Ventures, Honeycomb Asset Management and WestCap Group also participated in the raise.
Klarna will use the new cash injection to continue to expand internationally and to develop new products. It has been investing heavily in the US, where it now has 18 million customers. The new valuation represents an increase of almost 50% from Klarna’s post-money valuation of $31bn in March when it raised $1bn.
ID verification firm Trulioo adds $394m to its account
Canada-based global identity verification company Trulioo completed a $394m Series D funding round at a $1.75bn valuation.
The round was led by TCV, with participation from existing investors Amex Ventures, Citi Ventures, Blumberg Capital and Mouro Capital. The company intends to use the funds to expand operations and its business reach.
The firm has access to more than 450 data sources, which includes government agencies and credit bureaus. The company can also access phone records and various other details from nontraditional sources, it claimed.
Crypto firm Ledger gains unicorn status with $380m round
Hardware wallet maker Ledger closed a $380m Series C funding round led by digital asset fund 10T Holdings. Ledger’s funding round also garnered support from Cathay Innovation, Draper Associates, DCG – the parent company of CoinDesk, Korelya Capital and Wicklow Capital, among others.
The Series C raise places Ledger with an implied valuation of more than $1.5bn, marking the company’s rapid and accelerating growth. Funding will go towards furthering innovation of its hardware products, providing new services for decentralized finance solutions and expanding its enterprise capabilities.
Solana scores $314m in token sale
Solana Labs, the developer of the Solana blockchain, raised $314.15m in a private token sale round led by Andreessen Horowitz (a16z) and Polychain Capital. Other participants in the round included Alameda Research, CMS Holdings, CoinShares, Jump Trading, Multicoin Capital, Sino Global Capital, and many others.
With fresh capital at hand, Solana Labs plans to launch an incubation studio to speed up the development of projects building on the Solana blockchain and set up a venture investing arm for the Solana ecosystem.
Gong gains $250m
Gong, a platform leveraging artificial intelligence for sales teams, raised $250m in a funding round that tripled its valuation to $7.25bn.
The Series E round, led by Franklin Templeton, brings Gong’s total funding to $584m. Existing investors, including Sequoia Capital, Thrive Capital, Salesforce Ventures and Tiger Global, also participated in the round.
The company’s patented revenue intelligence platform analyzes emails, phone calls or video calls to provide insights about markets, deals and employee skills. Its platform also recommends next best steps to move forward in deals.
Scalable Capital enters billion-dollar club after $180m round
Germany-based neobroker Scalable Capital secured $180m in a Series E funding round and received a valuation of $1.4bn.
Tencent, one of the leading technology companies in China, led the latest funding round. In 2020, Scalable Capital secured nearly $58m in funding and received a valuation of $460m. The startup provides essential resources to manage investment portfolios.
Cybersecurity firm Aura inks $150m
Digital security company Aura raised $150m in Series E funding led by Warburg Pincus.
The company, which has raised a total of approximately $450m to date from investors including Accel, General Catalyst and WndrCo, intends to use the funds to enhance its customer experience, grow the user base of the new Aura product, accelerate development of new features and implement programs to increase consumer awareness through a national advertising campaign.
The company’s offerings are used by more than 1.7 million customers today, generating more than $220m in annual revenue.
GBM banks $150m from Softbank, earns the horn
SoftBank’s Latin America fund is investing as much as $150m in a subsidiary of Grupo Bursátil Mexicano, a decades-old Mexico City-based investment platform and brokerage firm that’s publicly traded. The funding, which valued the firm at over $1bn, will be used in part to expand into new verticals.
GBM has built an app, GBM+, that organizes and invests clients’ money through three different tools: Wealth Management, Trading and Smart Cash.
Last year GBM went from having 38,000 investment accounts in January 2020 to more than 650,000 by year’s end. In the first quarter of 2021, that number had grown to over 1 million — representing more than 30x growth from the beginning of 2020.
Capchase lands $125m
NYC-based provider of non-dilutive capital Capchase raised $125m in Series A equity and debt funding. The round was led by QED Investors, with participation from Bling Capital, ScifiVC and Caffeinated Capital and several angel investors.
The company intends to use the funds to launch just-in-time financing for tech companies and expand into the UK and Spain. The company has issued more than $390m in financing and more than 400 companies already use its platform.
RegTech firm CompySci hauls in $120m
ComplySci received a growth capital investment of about $120m from private equity firm K1 Investment Management.
ComplySci partners with C-suite teams and in-house compliance, legal and technology professionals to deliver technology-enabled employee compliance solutions for RIAs, broker-dealers, hedge funds, private equity firms, venture capital firms and other businesses across the financial services sector.
ComplySci’s platform is now used by over 1,400 customers, including some of the world’s largest financial institutions.
InsurTech Embroker snags $100m
Digital business insurance platform Embroker secured $100m in Series C funding. The funding round was led by FTV Capital with additional investment from HSCM Bermuda and Gaingels and follow on from Tola Capital, Canaan Partners, Bee Partners, and MassMutual Ventures.
Embroker applies modern data-driven underwriting models to assess risk better, and create policies and premiums that protect companies against that risk. It now plans to use the new funding to expand the company into a full-stack InsurTech by building its own insurance carrier.
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