Enterprise-backed fintechs raised a record $30.8 billion in the second quarter of this year, 30% more than the corresponding quarter of the previous year. And they’re raising more than ever, and faster — the average deal size this year is $47 million.
So, as a result of fintech founders now sitting on mountains of cash, how are they spending it all?
Unfortunately, statistics for private and public companies generally do not show how these dollars are spent. That said, perhaps some of the answers to the question of how well capital can be allocated are clearly hidden.
looking at the leaders
Now many fintech startups are approaching or surpassing $10 billion in value – the table below has a selection of the most prominent – so we can get some insight into their capital allocation strategies, considering By how they have spent to gain their position. Ecosystem. Some might argue that the differences in business models between these companies, their different markets, and ten-year periods of capital raising can make it challenging to extract any relevant insights from the study. But their fundraising and business building practices indicate otherwise.
Studying this selection of fintech “leaders” can give us key insights into how they have funded and built their businesses. Most of these companies built their business over the course of two years before launching their product and scaling rapidly with limited capital, sometimes even before a Series A – what’s happening in today’s fundraising environment, Quite different than that.
Many of these companies nurtured early champions of their product in both customers and distribution partners, allowing them to grow and grow without needing to sell to enterprises. They all eventually raised the monster round – at an astonishing 174x the multiplier of the capital raised before launch – but they waited to do so until their product was already adopted by the market.
All of these businesses share three common traits.
an evaluation inflection point
This sample showed a consistent valuation inflection point, despite differing business models, end markets, and being established at different times. Typically, these companies launch their product right after the Series A, use their Series B to fuel the fire, and then hit a 5x valuation uptick in the Series C.