“The Covid-19 pandemic has rattled both public and private markets globally. VC-backed fintech startups are no exception. Across the board, fintech funding activity stalled in Q1’20 as the coronavirus outbreaks forced investors to pull back investments,” according to CB Insights. According to the report, Q1 2020 saw funding drop to $6.1 billion over 404 deals, which represents one of the least active first quarters in years. The outbreak has had a “significant impact on fintech financing” yielding the least active Q1 since 2016 for deals and the least robust Q1 with respect to funding since 2017.
Further, as some experts and pundits have forecasted a recession, investors have scaled back early-stage gambles with the hopes of strengthening portfolios, the report suggests. As such, Q1 seed and Series A deals involving fintech start-ups dipped to a 13-quarter low with 228 transactions recorded. The $1.1 billion in funding represents a nine-quarter low for those same deals.
"Good product/bad business model can create value when combined with a bank/payments platform. But what buyer is going to pay seller investors a premium for synergies that the buyer itself delivers? So valuation is going to be tricky. #fintech #mergers
“Fintech funding in Asia, North America, Australia, South America, and Africa dropped quarter-over-quarter,” according to the report’s highlights. “In Q1’20, Asia saw a 69% drop in funding (to $883M) and a 23% drop in deals quarter-over-quarter. Europe was the only major region to see an increase in funding, driven by 4 mega-rounds ($100M+) including Revolut’s $500M Series D and Qonto’s $115M Series C.”
Also highlighted in the study is the new liquidity investors have experienced as 2020 undergoes a “fintech M&A spree.” For example, Plaid and Credit Karma were recently acquired. And, Sofi snatched up Galileo while LendingClub bought Radius Bank.
In its announcement to acquire Plaid for $5.3 billion, Visa boasted about its recent forays into fintech and desire to provide greater value to its customers. Plaid, the company stated, makes it easier for “people to securely connect their financial accounts to the apps they use to manage their financial lives.”
“We are extremely excited about our acquisition of Plaid and how it enhances the growth trajectory of our business," said Al Kelly, CEO and chairman of Visa. "Plaid is a leader in the fast growing fintech world with best-in-class capabilities and talent. The acquisition, combined with our many fintech efforts already underway, will position Visa to deliver even more value for developers, financial institutions and consumers.”
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