Dealmaking

COVID-19 has only reinforced the strength of the fintech sector

New PitchBook report 'illustrates fintech’s enduring strength'

While deal volume for fintech funding dropped off significantly in the first half of 2020 versus 2019, the sector’s overall VC haul grew substantially, according to a report produced for Mastercard Start Path by PitchBook.

The global report, released Thursday, shows fintech deal volume fell 31% from the first half of 2019 (1,444) to the first half of 2020 (992).

However, the amount of money pulled in climbed by close to 20%, going from about $16.9 billion in the first half of 2019 to about $20.1 billion in the first half of 2020, the Mastercard Start Path/PitchBook data shows.

On top of that, the median deal size rose. In the first half of 2019, median deal sizes ranged from $2.5 million in January to $3.9 million in June. By comparison, median deal sizes in the first half of 2020 fluctuated from $3.1 million in January to $6 million in May and June.

The report says that although fintech funding “was seeing some decline heading into 2020, COVID-19 does not seem to have further accelerated the decline.” Authors of the report say their data “illustrates fintech’s enduring strength.”

Deal flow started strong this January, at 191, followed by 173 in February and 173 in March, the report shows. Volume fell to 145 in April, when the coronavirus pandemic had an especially tight grip on the world, before inching back up again in May (149) and June (160).

“The dramatic impact of COVID-19 on the world’s economy has reinforced the strength of the fintech sector,” the report says. “Indeed, fintech is one of the few pockets within the economy that has seen a dramatic surge in usage … .”

A recent report on first-half fintech funding by CB Insights underscores the findings in the Mastercard/PitchBook report. CB Insights, a provider of business analytics, says the boost that e-commerce has gotten from the pandemic “is a tailwind for fintech providers.”

“Technology has reshaped the way financial services are delivered, making them more inclusive and convenient,” Dennis Cong, managing partner of China’s CreditEase Fintech Investment Fund, said in a CB Insights news release. “We believe that the fintech industry will see accelerating growth, especially in the post-pandemic era when the world is digitalizing in a faster-than-ever pace.”

An example of that accelerated growth: Israeli startup Melio, a provider of B2B payment software for small businesses, just came out of stealth mode and revealed it had raised $144 million since its founding in 2018. Investors include Accel, Aleph, Bessemer Venture Partners, Coatue Management, General Catalyst, LocalGlobe, Corner Ventures and American Express Ventures.

Melio raised $80 million in a Series C round in August and a $48 million Series B round in March. Before that, the startup received a total of $16 million in its Series A and seed rounds.

Melio says the pandemic caused its payment volume to soar 700% from March to August.“We are living in unprecedented times. Small businesses are the backbone of the U.S. economy, yet they are under intense pressure in the current environment. They require as much flexibility and control over their cash flow as possible to persevere,” Ken Chenault, former chairman and CEO of American Express and now chairman and managing director of General Catalyst, said in a Melio news release.

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