Research Briefs

Fin Tech,Q1’14 to Q2’15A data-driven look at fin tech trends and disruption in financial services

Table of Contents

Fin Tech Overview

The Future of FinTech and Banking: Global Fin Tech 1

Investment Triples in 2014

Where is the Smart VC Money Going in Fin Tech? 4

Follow the Unicorns

Early-Stage Fin Tech Funding is on Pace for the 7

Biggest Quarter of the Last Three Years

The Periodic Table of Fin Tech 10

Banks and Corporates

Here’s Where 6 Banking Giants are Placing their 14

Bets on Fin Tech Startups

Disrupting Banking: The Fin Tech Startups that are 17

Unbundling Wells Fargo, Citi and Bank of America

Google, Intel, and Other Tech Companies Attack 19

Fin Tech as Corporate Interest in Space Jumps 176%

Fin Tech Focus: Mobile and Millennials

The Mobile Fin Tech Landscape 23

Millennial Personal Finance - The Fin Tech 26

Startups Targeting Millennials

1

March 26, 2015Fin Tech Overview

The Future of FinTech and Bank-ing: Global Fin Tech Investment Triples In 2014Accenture’s new report ‘The Future of FinTech and Banking’ uses CB In-sights data to highlight trends in global financial technology and the mar-kets that are seeing the most growth.

Global investment in financial technology or ‘FinTech’ spiked in 2014 reach-

ing more than $12B in investment, demonstrating that the digital revolution in the sector is well underway. As fintech companies continue to grow and unbundle banks like Citi, Wells Fargo and Bank of America, established fi-nancial players are taking steps to make sure they stay ahead of the trend.

Those are among the many highlights of Accenture’s new report “The Fu-ture of Fintech and Banking: Digitally disrupted or reimagined?” which is based on CB Insights data.

The report offers insightful commentary and analysis around Fin Tech’s growth trajectory and how banks can stay competitive against their smaller tech incumbents. Below are some highlights in the Accenture report. The entire 12-page report can be downloaded for free by logging into CB In-sights and visiting the Research tab. If you don’t have an account, you can create one for free here (note: if you’ve already hit free trial limits, you won’t be able to get the report).

2

Global Fintech Investment explodes in 2014

Global fintech investment jumped 201% between 2013 and 2014, breaking the $12B mark across more than 730 deals. The US makes up the lion’s share, but Europe experienced the highest level of growth, with an increase of 215% (year-on-year).

UK and Ireland Continue to Dominate EU Fintech

Whilst the UK and Ireland dominate Europe’s fintech investment, the rest of Europe is showing promise: the most significant levels of investments were in the Nordic countries ($345 million), the Netherlands ($306 million) and Germany ($82 million).

3

Silicon Valley Increases Their Fintech Investment Pace While UK Slows Down

Fintech investment growth in the UK and Ireland was slightly slower (up 136% to $623 million) although the region accounted for 42% of European investment. Following a relatively slow 2013, fintech investment in Silicon Valley more than doubled (117%), pushing the start-up hotspot over the $2 billion mark, more than the total investment in Europe ($1.48 billion).

4

July 26, 2014Fin Tech Overview

Where is the Smart VC Money Going in Fin Tech? Follow the UnicornsFin Tech deal activity by 12 top VC firms ranging from Sequoia Capital to Andreessen Horowitz has grown 61% from 2010 to 2013.

If trying to understand the emerging business models, technologies and disruption in Fin Tech, one of the smart ways we are seeing financial ser-vices firms do this is by following deals and investor money flowing into Fin Tech companies. But instead of tracking all investors, let’s follow the smart VC money since as we all know, not all VCs are created equal.

And within the Fin Tech universe today, the smart money VCs are investing in technologies ranging from peer-to-peer loan marketplaces to mobile pay-ments to big data tools for capital markets.

As new innovation rapidly makes its way through the financial services sector, Fin Tech investments across the entire ecosystem have exploded in recent years. Of note, a recent report released by Accenture and the New York City Investment Fund using CB Insights data found global Fin Tech investments reached nearly $3B in 2013 from under $930M in 2008.

This research brief highlights the Fin Tech investment activity of 12 of the top venture firms as identified by our tech unicorn VC analysis. The VC firms whose Fin Tech investments are analyzed include:

• Greylock Partners• Kleiner Perkins Caufield & Byers• New Enterprise Associates• Redpoint Ventures• Sequoia Capital• Union Square Ventures

• Accel Partners• Andreessen Horowitz• Battery Ventures• Benchmark Capital• Bessemer Venture Partners• CRV

5

2014 will be a record year for smart VC investment in Fin Tech

Looking at deal activity within the Fin Tech market since 2007 by these 12 VC firms, we see a significant surge in deal activity since 2009. In fact, total Fin Tech deals by the 12 firms in 2013 grew 61% compared to 2010 and a notable 309% compared to 2009. The growth in Fin Tech deals accounts for both new investments as well as follow-on bets to Fin Tech startups ranging from Stripe to Wonga to Betterment to Level Money.

Which areas within Fin Tech are top VCs bullish on?

Using the CB Insights’ Business Social Graph, we visualized the universe of Fin Tech companies that the 12 VC firms have invested in since 2007 and find hundreds of deals within Fin Tech that the top firms have partici-pated in.

6

While Fin Tech investments span a diverse array of companies ranging from payments to asset management to personal financial management, there appear to be several themes that these brand-name venture firms see opportunities in. When we use the Business Social Graph inputs and cluster companies by focus area, four markets emerge as being consistent areas of focus among the top 12 venture firms. These include:

• Lending• Personal finance management• Payments technology• Bitcoin

With hundreds of investments, there are many fledgling as well as many more established private companies on the list. Some of the startups which feature investment from multiple investors include Square (backed by Sequoia and Kleiner Perkins), Boku (Benchmark, NEA, A16Z), Stripe (Sequoia, Redpoint, A16Z), Coinbase (A16Z, Union Square Ventures) and Funding Circle (Accel, Union Square Ventures).

As financial services institutions increasingly begin to monitor the changing landscape before them, following the smart money is perhaps one of the best ways to understand the trends they should stay ahead of and the com-panies they may want to watch from a competitive, acquisition, partnership or procurement perspective.

7

June 4, 2015Fin Tech Overview

Early-Stage Fin Tech Funding Is On Pace For The Biggest Quar-ter Of The Last Three YearsEarly-stage fin tech funding this quarter could surpass the previous high by more than $200M.

in the number of deals and up 23% versus the same quarter a year prior.

Things don’t look to be slowing down as Q2’15 is on pace for largest amount invested since the start of 2012. So far, the Q2’15 deals include over ten $10M+ Series A financings, among them Ripple Labs’ $28M and Patch of Land’s $23.8M financings. Q2’14 holds the previous quarterly high, with early-stage Fin Tech funding reaching $437M in that quarter.

8

Top early-stage Fin Tech companies

We used CB Insights Company Mosaic to analyze some of today’s top early-stage fin tech startups globally. Mosaic takes into account various quantitative factors to rank startups, including fundraising, web traffic, social media traffic, and job listings, among other things.

Ireland-based money-transfer company CurrencyFair topped our list. The company most recently raised a $10.7M Series A in April 2015 from Octo-pus Investments and Frontline Ventures. Germany-based modern-banking startup Number26 was second, as the company’s web traffic has increased drastically in the months leading up to its $10.6M Series A in April 2015.

Notably, 3 of the top 5 early-stage fin tech companies per Mosaic are based outside of the US.

9

Most active early-stage VCs

The usual suspects topped the list of most active early-stage VCs in Fin Tech since 2012, with 500 Startups, Google Ventures, and SV Angel round-ing out the top 3. 500 Startups’ more notable investments include Chain, a tool for developers to build apps related to the blockchain, as well as Let-tuce, a small business finance-management tool that was acquired by Intuit in May 2014.

Google Ventures, the most active corporate venture investor overall in Fin Tech, also has made many early-stage bets in the space since 2012. Their notable investments include ZenPayroll, which recently raised a $60M Se-ries B at a $560M valuation and Robinhood which raised a $50M Series B in May 2015. Google Ventures is a seed investor in both companies.

See below for the full ranking.

10

December 12, 2014Fin Tech Overview

The Periodic Table of Fin TechThe 177 companies, VCs, corporate investors, angels, accelerators, and acquirers engaged in the Fin Tech space that you should know.

Financial services is under assault. From wealth management to remittanc-es to payments processing, the landscape of private companies, investors and corporate strategics investing and acquiring in financial technology, otherwise known as Fin Tech, has grown immensely.

So after putting out the Periodic Table of IoT, we’re excited to introduce our second industry cut — the Periodic Table of Fin Tech – a resource to help illuminate the key players in Fin Tech ecosystem. The 177 companies, investors and acquirers on the table were pulled from analysis using CB Insights data around financial health, company momentum, investor quality and M&A/IPO activity.

We expect that this list of 177 will change over time as new entrants emerge and gain prominence and others falter, exit and/or get removed.

11

Navigating the Periodic Table of Fin Tech

The table focuses on seven different types of organizations as follows (from left to right).

• The left side of the Periodic Table of Fin Tech includes companies across several key Fin Tech verticals. Additional details on these sub-ar-eas of Fin Tech are below.

• On the far right, the table shifts to venture capital firms (both multi-stage and micro VCs), corporate investors, angels, accelerators/incubators selected based primarily on total portfolio investments into Fin Tech and recency of investment in Fin Tech (since 2009). Not surprisingly, several Fin Tech-specific funds and accelerators made it on to the table.

• The bottom section below is acquirers and notable Fin Tech exits.

As disruptive startups look to tackle different segments of traditional finan-cial services, we analyzed Fin Tech companies within seven sub-industries detailed below:

Lending

Private lending companies on the list includes primarily peer-to-peer lend-ing platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.

Payments/Billing Tech

Private payments and billing tech companies span from solutions to facili-tate payments processing to payment card developers to subscription bill-ing software tools.

Personal Finance/Asset Management

Private tech companies that help individuals manage their personal bills, accounts and/or credit as well as manage their personal assets and invest-ments.

12

Money Transfer/Remittance

Private money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.

Digital currency

Companies here span key software or technology firms in the digital cur-rency space ranging from bitcoin wallets to security providers to sidechains.

Institutional tools

Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds or other institutional investors. These range from alternative trading systems to financial modeling and analysis soft-ware.

Equity crowdfunding

Platforms that allow a collection of individuals to provide monetary contribu-tions for projects or companies provisioned in the form of equity.

Venture Capital Firms

Venture capital firms included make venture equity investments across the stage spectrum and geographies focusing on Fin Tech companies. The VC firm category spans both micro VCs and large multi-stage firms with LP commitments ranging from $25M to well over $1B+.

Corporate Investors

Corporate investors into Fin Tech include both corporations making direct investments and separately identifiable corporate venture units such as Citi Ventures or BBVA Ventures.

13

Angel Investors

Fin Tech angel investors listed are individual angel investors who offer ear-ly-stage capital, advice and networks to startups in exchange for equity or convertible debt.

Accelerators/Incubators

Accelerators and startup incubators typically offer some combination of eq-uity investment, mentorship and resources around company development. Those on the Fin Tech periodic table have either funded a number of Fin Tech portfolio companies or have a specific focus on Fin Tech i.e. Boost.vc, FinTech Innovation Lab.

Fin Tech Acquirers

Key public corporations that have acquired private FinTech companies in the last five years.

Notable exits

Key Fin Tech companies that have been acquired or went public in the last 5 years ranging from lending and money transfer firms (Lending Club, Xoom) to personal finance and bill paying tools (Check, Mint.com).

14

July 14, 2015Banks and Corporates

Here’s Where 6 Banking Giants Are Placing Their Bets On Fin-Tech StartupsMajor banks including Goldman Sachs, Morgan Stanley, Citi, and Bank of America share overlapping investments in financial tech startups.

Funding to financial technology is thriving as startups in the space harness major trends like big data, mobile, and social networks.

Major banking giants aren’t sitting on the sidelines as they see some of these startups attack traditional banking segments, including payments, wealth management, and billing.

Six major banks — Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — have made strategic invest-ments in 30 financial tech (fintech) companies since 2009, according to CB Insights data.

Of the six banks, Citigroup has been most active — primarily through its strategic venture arm Citi Ventures — which has invested in fintech startups ranging from Betterment to Jumio to Square. Goldman Sachs, as we’ve previously detailed, has increasingly ventured into fintech startup investing, with thematic investments across payments tech and big data finance.

15

The chart below shows total fintech deals (new and follow-on) by the six banks since 2009. Note: Debt and lines of credit were not included in the analysis.

One useful way to visualize investor strategies in fintech is to use CB In-sights’ Business Social Graph, which shows how the banks’ investments intersect and diverge. Interestingly, the six banks’ investments overlap in a number of cases, as the visualization below highlights.

JPMorgan and Goldman Sachs for example, have both backed Motif In-vesting, a San Mateo, California-based online brokerage allowing users to buy baskets of stocks. Morgan Stanley, Bank of America, and Citi (as well as UBS and Jefferies) have all invested in Visible Alpha, a startup offering a platform for aggregating and interpreting stock analyst models and forecast data. Perhaps most notably, mobile payments company Square has gar-nered investments from four separate bulge-bracket investment banks as its valuation climbed to $6B: Goldman Sachs, Citi Ventures, JPMorgan, and Morgan Stanley.

16

More thematically, several categories have been prominent for bank invest-ments in fintech:

Payments tech: A number of the banks have invested in various payments startups ranging from Square and Obopay in mobile payments, to busi-ness-payments network BIlls.com, and online transaction company Revolu-tion Money. The latter was acquired by American Express in 2010.

Data analytics: Another hot area is big data analysis as it pertains to finan-cial services. Goldman Sachs and Bank of America share an investment in Context Relevant, which offers an advanced analytics platform for financial services. Goldman has also invested in Kensho Technologies, Dataminr, and Antuit in this category. Citi Ventures counts big data analytics firm Ayasdi as a portfolio firm.

Two other areas that saw multiple bank investments include personal fi-nance tech (Betterment, Motif) and P2P lending (Prosper Marketplace and Lufax).

17

March 22, 2015Banks and Corporates

Disrupting Banking: The Fin-Tech Startups That Are Unbun-dling Wells Fargo, Citi, and Bank of AmericaTraditional banks are under attack from a number of emerging specialist startups. Here are the FinTech startups unbundling banking.

In November, Tom Loverro of RRE Ventures wrote that “banks are under attack” and showed a few of the major players leading this trend. Inspired by his post and Alexander Pease’s, we wanted to dig in and see how banks are being unbundled by startups. The graphic below details companies attacking bank services ranging from robo-advisers wealth management services like Wealthfront and Betterment to small business loan companies like OnDeck Capital and Kabbage to small business service providers like Zenefits and ZenPayroll, and many other areas.

As we detailed in our analysis of the startups disrupting FedEx, these emerging companies attacking Wells Fargo, Bank of America, Citi and banking more generally are not attacking them head on across multiple products. Instead, they’re attacking individual services & products (hence the term “unbundling”). Said another way, are banks going to be out-inno-vated and lose their edge not because of their incumbent, large compet-itors, but because emerging startups inflict upon them a death by a thou-sand cuts?

18

While many international players are also unbundling banks, this infograph-ic focuses on US-based companies. We’ll separately analyze the interna-tional players going after banks.

19

May 31, 2015Banks and Corporates

Google, Intel, and Other Tech Companies Attack Fin Tech as Corporate Interest in Space Jumps 176%As corporations ramp up investment activity into fintech, what sectors are companies like Google and Intel focusing in on?

Investment dollars into Financial Technology (“Fin Tech”) tripled in 2014. Strategic or corporate investors are one of the key drivers of the increase as the emergence of Fin Tech has corporates ranging from Google to Mas-terCard to Citigroup actively investing in the space. This research brief highlights investing trends by corporates in the Fin Tech space, including the rising number of corporate investors, the most active corporates and where the top non-financial services corporations are looking in Fin Tech. One of the most interesting facets of the recent fin tech boom is the emer-gence of these “unusual suspect” investors who see massive opportunity in disrupting traditional financial services.

Corporate investors in Fin Tech rise 176%

Fin Tech is top of mind for many of the largest corporations in the world. In 2014, more than 90 unique corporations invested in Fin Tech startups, a 176% increase from 2010.

20

Fin Tech funding with corporate participation set to double

Deals and investment dollars involving corporates are also on the rise, with 2015 set to double 2014′s funding levels. $1.4B was invested across more than 110 deals last year, which included twelve $50M deals including Moz-ido, Credit Karma, and OnDeck Capital. 2015 has already seen more than $700M invested, including large deals in Coinbase and LendingHome.

The most active corporates in Fin Tech

While large financial players like banks and insurance providers are invest-ing at a higher rate, the chart of most active corporate investors in Fin Tech is topped by tech companies. The top investor is Google Ventures, who has made 25 unique company investments into Fin Tech since 2010, followed by Intel Capital who was the only other investor with more than 10 invest-ments into the space.

21

Where the ‘unusual suspects’ are investing

Of the top 3 non-financial players (Google, Intel, and eBay), Intel and Ebay have more specific investment focuses. While Intel is very focused on pay-ments tech/mobile payments, Ebay is more focused on mobile commerce and ecommerce enablement.

Intel has notably made a large number of investments outside of the US, including companies like iZettle (Sweden), Elike (Brazil), and UUCun (Chi-na). While Ebay has not made as many investments as the other tech giants, it has acquired two of its investments (Magento and BillSafe).

22

Google on the other hand has made investments across a wider spectrum of fin tech spaces ranging from small business loans (OnDeck Capital) to personal savings (Hello Digit). Four of the spaces Google seems particularly interested in are crowdfunding, digital currency, trading tools, and back office software with at least three investments in each. Below are some of the select areas these non-financial investors are focusing on.

23

May 28, 2015Fin Tech Focus: Mobile and Millennials

The Mobile Fin Tech LandscapeMobile Fin Tech companies are garnering significant interest from inves-tors. We looked at the financing trends, biggest deals, and top companies.

Mobile Fin Tech investment activity has picked up drastically thus far this year, with over $1.1B raised in equity financings globally across 58 financ-ings. This is part of a larger trend, which has seen mobile Fin Tech funding top $300M in 4 of the last 5 quarters, including Q2’15, which already is the biggest quarter since 2012 behind multiple nine-figure investments to One97 Communications (Paytm) and Max Levchin’s Affirm.

Overall Q1’15 funding, which reached $372M, was up 238% versus the same quarter a year prior.

One97 Communications, the maker of Paytm, India’s largest mobile com-merce platform, has accounted for 2 of the 3 largest deals to Mobile Fin Tech thus far this year, having raised a cumulative $575M from Alibaba and their financial arm Ant Financial Services Group. The company is now val-ued at upwards of $1.8B.

24

Overall, 4 of the 10 largest deals went to Asian companies, with Enniu Internet Technology, maker of u51, a mobile credit card management and analytics platform raising $50M, and India’s MobiKwik, a mobile wallet company, raising a $25M Series B. Cumulatively the top 10 deals thus far in 2015 have raised over $1B.

We used CB Insights Company Mosaic to assess the health and momen-tum of some of today’s top Mobile Fin Tech companies. Mobile payments company Square scored the highest, with a 960 (out of 1000) overall Mosa-ic score. Square most recently raised a second tranche of Series E invest-ment from Victory Park Capital and Colchis Capital for an undisclosed sum. The company was last valued at $6B.

Robinhood, the commission free investment platform ranked second, with a 940 Mosaic score. The company just raised a $50M Series B in early May, which drove a jump in news mentions and social media traffic.

India-based MobiKwik rounded out the top three, as the mobile wallet com-pany has a Mosaic score of 920. Mobikwik raised a $25M Series A in April 2015 from investors such as Sequoia Capital India, American Express Ven-tures, and Cisco Investments.

25

The top 10 Mobile Fin Tech companies by Mosaic below:

26

May 24, 2015Fin Tech Focus: Mobile and Millennials

Millennial Personal Finance – The Fin Tech Startups Targeting MillennialsFin Tech startups targeting the millennial demographic have raised over $2.29B across 126 deals. They range from ‘robo-advisors’ offering low-cost alternatives to brokerages to lending firms innovating in credit risk to stock-picking and automated savings apps.

Spanning a cohort born between 1980 to 2000, millennials broadly make up one of the largest generations in history (bigger than the baby boom generation). Millennials are also investing, lending and sharing money much differently than their parents, and they are assisted by a growing set of tech-driven tools to do so.

The changing ways in how millennials manage their money is top of mind for many of the largest financial institutions in the world. In February, Gold-man Sachs released an infographic on how millennial habits in health, mar-riage, housing and more are impacting the economy.

Now, a host of Fin Tech startups, and the investors backing them, are bank-ing on millennials as a key demographic for their success. Fin Tech startups prominent in the millennial demographic range from ‘robo-advisors’ offering low-cost alternatives to brokerages to lending firms innovating in credit risk to stock-picking and automated savings apps.

Many of the Fin Tech startups are leveraging existing technologies already popular among young adults such as social networks and mobile mes-saging. Project crowdfunding sites GoFundMe and Andreessen Horow-itz-backed Tilt, for example, mirror or take advantage of social networks and are largely popular among college audiences. Google Ventures and General Catalyst-backed HelloDigit transfers money directly via text mes-sage.

27

The graphic below breaks down the set of Fin Tech companies appealing to the millennial generation including Robinhood, Acorns, Wealthfront, Earnest and more. In aggregate, millennial Fin Tech startups below have raised over $2.29B across 126 deals. Click the graphic to expand.

Below is a full list of the companies on the graphic broken down by target area. If there are other emerging companies that you think should be high-lighted, leave them in the comments as well.