A record of $2.5bn was invested in WealthTech companies last year, according to research from FinTech Global. Funding in 2018 is on track to surpass this, with $2bn raised in the opening quarter alone. The sector is poised for continued growth as the wealth and asset management industries are transformed by the rapid adoption of technology, and investors go after a multibillion dollar opportunity.
Global WealthTech investments have nearly tripled since 2014
Investment in WealthTech companies increased from $928.6m in 2014 to $2.5bn in 2017 at a CAGR of 28.5%. This upwards trend is on track to continue in 2018, as capital invested in Q1 set a quarterly record of $2bn which equates to 79.3% of last year’s total. Almost 60% of this funding came from six later-stage deals valued over $100m. In comparison, there were eight such deals closed during the whole of 2017.
Despite the high investment total in 2017, deal activity dropped by 12.7% compared to the previous year. The 51 deals completed in Q1 2018 are historically mid-range, and represent 21.2% of last year’s total. Hence, if this trajectory continues for the remainder of 2018, deal activity is set to fall again.
Investors are increasingly favouring later-stage deals
There has been a shift towards larger deals as the WealthTech sector moves towards maturity. Deals valued less than $1m dropped in share from 38.7% to 20.9% between 2014 and 2017. This downtrend continued in Q1 2018 when just 12.8% of deals completed were in this size bracket.
All categories above $1m increased in deal share between 2014 and 2017. The largest rise was in deals valued between $1-5m, which jumped by 7.1 percentage points (pp), while deals in the above $20m category rose by 4.6pp. In Q1 2018, deals larger than $20m accounted for 44.7% of the total, while two thirds of all deals were valued above $5m.
The maturing industry is also evidenced by the reduced deal activity last year, which is currently projected to continue in 2018, as investors become more selective by placing bigger bets on fewer companies.
The top ten WealthTech deals in Q1 2018 raised $1.5bn
The combined total of the top ten WealthTech deals in Q1 2018 reached almost $1.5bn, equating to 73.1% of the overall amount invested in the quarter. The largest was a $500m secondary investment in Credit Karma, a credit and financial management platform, from Silver Lake Partners. As a result of the investment, Credit Karma’s valuation increased by 23% making it worth approximately $4bn.
Six of the top ten investments were raised by companies offering online banking solutions, three of which are challenger banks: Atom Bank, Nubank and N26. The only investment in a company based outside of North America or Europe went to Nubank, a Brazil-based challenger bank. The $150m Series E round was led by DST Global with co-investment from Thrive Capital and Ribbit Capital, among others. The funding will be used to further support the company’s growth and expansion.
The data for this article is sourced from the FinTech Global platform. More in-depth research, data and analytics on investments and companies across all fintech sectors and regions around the world are available to subscribers of FinTech Global at www.FinTech.Global.