Corporate-backed fintechs have been lifted a record $ 30.8 billion in the second quarter of this year, up 30% from the same quarter last year. And they’re collecting more and faster than ever – the average deal size is $ 47 million this year.
So, with the founders of fintech now sitting on mountains of cash, how are they spending all of this?
Unfortunately, data from private and public companies generally does not show discernible trends in how those dollars are spent. That said, perhaps some of the answers to the question of how much capital can be allocated are hiding in plain sight.
A look at the leaders
There are now a large number of fintech startups approaching or far exceeding the value of $ 10 billion – the table below shows a selection of the most important – so we can get an overview of their capital allocation strategies by considering how they spent to achieve their position in the ecosystem. Some might argue that the differences in business models between these companies, their disparate markets, and studying a ten-year period of raising capital could make it difficult to extract relevant information. But their fundraising and business creation behaviors indicate otherwise.
Studying this selection of fintech “leaders” can give us critical insights into how they funded and built their businesses. Most of these companies built their businesses in two years before launching their product and growing rapidly with limited capital, sometimes even before a Series A, which is quite different from what happens in the environment. fundraiser today.
Many of these companies formed the first champions of their product among their customers and channel partners, which allowed them to grow and grow without the need to sell to companies. All eventually raised monster towers – at an incredible multiple of 174 times the pre-launch capital raised – but they waited to do so until their product had already been adopted by the market.
All of these companies share three common traits.
An inflection point for valuation
Although it has different business models, end markets, and was founded at different times, this sample showed a consistent valuation inflection point. Typically, these companies launched their product right after Series A, used their Series B to fuel the fire, and then increased the valuation of Series C by 5 times.