1WHO WE ARE The technology market intelligence platform. CB Insights software lets you predict, discuss, and communicate emerging technology trends using data in ways that are beyond human cognition. We are a leader in the Expert Automation & Augmentation Software (EAAS) space. 2 TRUSTED BY THE WORLD’S LEADING COMPANIES “We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources.” Beti Cung, Corporate Strategy, Microsoft 3 The CBI Community — Membership Has Benefits INDUSTRY-SCALE SUMMITS PEER-TO-PEER CLIENT-ONLY EVENTS NETWORK DEMO DAY 4 WHAT THIS REPORT COVERS Payments processing, card developers, Alternative underwriting, claims, & subscription billing software tools distribution, and/or brokerage platforms Tools to manage bills and track Sales & trading, analysis, and infrastructure personal and/or credit accounts tools for financial institutions PAYMENTS/ INSURANCE BILLING PERSONAL CAPITAL FINANCE MARKETS Audit, risk, and regulatory Investment and wealth management compliance software platforms and analytics tools WEALTH REGTECH MANAGEMENT Companies leveraging blockchain MONEY International money transfer technologies for financial services BLOCKCHAIN/ TRANSFER/ and tracking software CRYPTO REMITTANCES MORTGAGE/ LENDING REAL ESTATE Peer-to-peer lending & alternative Mortgage lending, digitization, underwriting platforms and financing platforms 2018 FINTECH TRENDS REPORT 5 Contents 8 2017 Financing Trends 103 Appendix: Annual Deals & Dollars 2017 Top VC-Backed Fintech Deals Regional Trends 2017 Most Active Fintech Investors Fintech unicorns Fintech Exits: IPO & M&A 18 2018 Trends To Watch What to watch for in 2018 Where investors are placing bets in fintech Which markets will see fintech emergence How incumbents will act 6 Europe saw the biggest fintech funding jump 3. Global fintech financing hit a new record 2. US early-stage fintech deals fell as investors made more concentrated bets 7 . a look at what happened in 2017 1.First. FINTECH DEALS AND FUNDING HIT NEW HIGHS 2017 was a record year for VC-backed fintech Annual global fintech deals and financing.8 $8.8 $16.6 2013 2014 2015 2016 2017 8 .0 $14.3 $13. 2013 – 2017 ($B) 1128 1023 951 788 594 $3. Q4’17 SAW A FOUR-QUARTER LOW FOR GLOBAL VC-BACKED FINTECH DEALS Despite the annual rise. global VC-backed fintech deals fell for second straight quarter in Q4’17 294 289 277 288 254 258 260 270 225 241 233 224 214 204 187 166 169 173 134 136 123 103 9 . 676 $1.794 $1.262 $6.891 $7.210 -10% YoY $4.583 $5.570 $8.065 $801 $377 $2.438 $1.Europe fintech funding grew over 120% in 2017… Global VC-backed fintech funding share by continent 2013 – 2017 ($M) +121% YoY $2.127 $5.281 $5.765 $1.837 2013 2014 2015 2016 2017 North America Asia Europe Africa Australia South America 10 . …while Asia funding fell for the first time in 4 years Annual funding to VC-backed fintech companies.583 $2. 2013 – 2017 ($M) $8.765 $1.891 $4.065 $377 2013 2014 2015 2016 2017 11 .210 $801 $1.262 $1.127 -10% YoY $2.676 Europe $1.281 North $7.794 Asia $5.570 $5.837 America $6.438 $5. Early-stage fintech deal share drops to 5-year low Annual deal share by stage to global VC-backed fintech companies. 2013 – 2017 9% 8% 10% Other 11% 13% 8% 8% 8% 7% 9% Late-Stage 16% 19% 21% 20% Mid-Stage 20% Early-Stage 67% 65% 61% 61% 58% 2013 2014 2015 2016 2017 12 . 2013 – 2017 .EARLY-STAGE FINTECH ACTIVITY STILL STRONG IN ASIA & EUROPE US early-stage fintech deals hit a 5-year low Annual Seed and Series A deals to VC-backed fintech startups.23% YoY 310 314 302 256 North 243 America 190 Europe 142 171 Asia 127 137 95 121 69 93 55 2013 2014 2015 2016 2017 13 . 2013 – 2017 20 17 11 9 8 8 5 4 3 3 2 1 1 0 0 2013 2014 2015 2016 2017 North America Asia Europe 14 .76B Global number of fintech mega-rounds ($100M+).INVESTORS MADE MORE CONCENTRATED FINTECH BETS IN 2017 2017: 35 fintech mega-rounds total $7. GLOBALLY THERE ARE 25 FINTECH UNICORNS VALUED. IN AGGREGATE.9 BILLION 15 . AT $75. 9B Global VC-backed fintech companies with a private market valuation of $1B+ EUROPE UNITED KINGDOM SWEDEN NETHERLANDS NORTH AMERICA UNITED STATES $1.7B $9.5B $18.3B ASIA CHINA $1.6B $2.4B $1.1B Valuation $1B $2.9B 16 .5B $7B $3.79B Valuation $1. 25 fintech unicorns valued at $75.3B $1.5B $2.4B (as of Q4’14) $1.46B $1.2B $1B $2.2B $1B Valuation $1B $4.56B $1B $1.5B $1B $2B (as of Q2’15) INDIA $3. 6B $2.4B $1.9B 17 .5B $18.79B Valuation $1.5B $1B $2B (as of Q2’15) INDIA $3.3B $1.2B $1B Valuation $1B $4. 2017 Sees 8 Fintech Unicorn Births Global VC-backed fintech companies that notched a private market valuation of $1B+ in 2017 EUROPE UNITED KINGDOM SWEDEN NETHERLANDS NORTH AMERICA UNITED STATES $1.1B Valuation $1B $2.7B $9.56B $1B $1.5B $7B $3.5B $2.2B $1B $2.4B (as of Q4’14) $1.46B $1.3B ASIA CHINA $1. LOOKING AHEAD 2018 FINTECH TRENDS TO WATCH 18 . 2018 TRENDS TO WATCH 1. Capital markets fintech infrastructure becomes a focus area for investment 8. Banks deepen their partnerships with regtech 9. Amazon is primed to get more aggressive in fintech — outside of the US 19 . Fintechs unbundling leads to rebundling 2. More companies will look to sell pickaxes amid cryptoasset speculation 7. Insurance tech investment moves to the back-end 10. European fintechs will expand their global footprint 3. Latin America and Southeast Asia will see strong fintech growth 6. Bank’s forgo partnering in favor of fighting fintech with fintech 4. Wealth management will become the hottest fintech sector in China 5. #1 FINTECH REBUNDLING Unbundling leads to rebundling 20 . Before: Unbundling the bank Over the last ten years. and branding 21 . digital marketing. fintech startups have targeted single underserved financial products with better UI. and partner to grow 1 2 3 MONO-PRODUCT TO LEVERAGING TECH FOR OPEN NEW INVESTING MULTI-PRODUCT PRODUCT INNOVATION CHANNELS Startups move beyond a one-product Startups focused on personalization Startups are creating next-gen model and are launching new services create new methodologies to deliver investment platforms for new asset to expand customer’s digital footprint services more efficiently and holistically classes ahead of bank offerings 22 . buy.Now: Fintechs build. Now: Fintechs build. buy. and partner to grow 1 2 3 MONO-PRODUCT TO LEVERAGING TECH FOR OPEN NEW INVESTING MULTI-PRODUCT PRODUCT INNOVATION CHANNELS Startups move beyond a one-product Startups focused on personalization Startups are creating next-gen model and are launching new services create new methodologies to deliver investment platforms for new asset to expand customer’s digital footprint services more efficiently and holistically classes ahead of bank offerings 23 . 2017 24 . and part wealth management app launches MoneyLion Plus November 6. 2017 Stash is expanding into personal + banking with the planned launch of Stash bank accounts October 3. 2017 + MoneyLion. the part lending. Next-gen fintech Fintechs are becoming more aggressive in expanding their lines of business beyond their initial use case BUILDING BUYING PARTNERING Wealthfront now offers portfolio lines of credit + April 19. part savings. QED Investors. the company did over $500M in revenue by aggregating financial products and offering them to its members.5M Ribbit Capital.MOVING BEYOND AN AGGREGATOR EXPANDING INTO TAX Total Funding Select Investors $368.000. In 2016. CapitalG ~1 million Users filed tax returned with the IRS through Credit Credit Karma provides free credit Karma’s free tax software in 2017 scores and monitoring for 75M+ members.5M $105M 25 . Users of the no-interest loan receive the advance via an American Express prepaid card. In January 2018. Credit Karma partnered with MetaBank to offer online refund advances up to Competitors $1. $82. ROBINHOOD TOPS 3M+ USERS Robinhood planning desktop app — are wealth management services next? INVESTORS LOOKING FOR A DIY SOLUTION NEXT UP: A DESKTOP TO HELP CAN TURN TO ROBINHOOD FOR $0 ETF’S ATTRACT MATURE INVESTORS 26 . and partner to grow 1 2 3 MONO-PRODUCT TO LEVERAGING TECH FOR OPEN NEW INVESTING MULTI-PRODUCT PRODUCT INNOVATION CHANNELS Startups move beyond a one-product Startups focused on personalization Startups are creating next-gen model and are launching new services create new methodologies to deliver investment platforms for new asset to expand customer’s digital footprint services more efficiently and holistically classes ahead of bank offerings 27 .Now: Fintechs build. buy. ” Renaud Laplanche Co-founder and CEO.“Continued rebundling will give birth to at least one major consumer product innovation. Upgrade 28 . return on investment). is crowdfunding next? Square patent grant highlights how data and technology can lead to product innovation The recently granted patent details how a merchant might make the request through the Square point-of-sale terminal. Patent: CB Insights Analysis 29 .g. and be evaluated based on its processed transactions history.From POS to lending. include specific terms (e. Now: Fintechs build. and partner to grow 1 2 3 MONO-PRODUCT TO LEVERAGING TECH FOR OPEN NEW INVESTING MULTI-PRODUCT PRODUCT INNOVATION CHANNELS Startups move beyond a one-product Startups focused on personalization Startups are creating next-gen model and are launching new services create new methodologies to deliver investment platforms for new asset to expand customer’s digital footprint services more efficiently and holistically classes ahead of bank offerings 30 . buy. Index $85. In addition to applying for a banking license. Ribbit Capital Revolut is a personal finance app for customers to buy.98M Ventures. hold.6M $138. and exchange currencies at a reduced fee.2M $14. Revolut added fintech partnerships & added cryptocurrencies to the platform in 2017.6M 31 . Competitors $52.FINTECHS EXPAND INTO NEW ASSET CLASSES AHEAD OF BANKS Total Funding Select Investors Balderton Capital. Square Cash rolls out bitcoin Square’s Cash App is the #1 app in the ‘Finance’ category of the App Store. Source: TechCrunch 32 . In late 2017. Cash App quietly added the ability to send bitcoin to friends. #2 CHALLENGER BANKS ARE COMING TO AMERICA European fintechs will expand their global footprint 33 . 2018 | In 2018. Funding Circle expands US foothold $373.EARLY EXAMPLE OF FINTECH EXPANSION Prior to IPO. the company is launching new partnerships. Funding Circle Reported Stats (as of 12/7/17) announced crossing new lending Global lending $5B Across 40.700 US businesses rumors of a potential IPO. Best Month $260M In November 2017 34 . January 04.2M $1B Valuation + Select Investors Accel Partners.000 businesses records. Rocket Funding Circle Announces Strategic Partnership with Internet. Union Square Ventures Kansas INTRUST Bank to Support Growth of US Funding Circle is a direct lending Small Businesses platform for SMB business loans. and has renewed US lending $1B Across 6. Ribbit Capital. 4M $2.5B Valuation Select Investors Sequoia Capital. Permira.EARLY EXAMPLE OF FINTECH EXPANSION Klarna takes on US online point-of-sale financing $369. Klarna was a granted a European Klarna has grown to 500 US online retail banking license in June 2017. DST Global Klarna is Sweden-based alternative payments platform that aims to provide a frictionless buying experience to buyers and sellers. partners since launching its first credit product stateside in October 2016 35 . 2018 | 36 . European banks from the UK and Germany may look to challenge US fintech for market share and tech talent PUTTING DOWN LAUNCHING IN THE US GLOBAL ROOTS TransferWise is launching its new borderless account and debit card that can hold 28 currencies in one account January 18.More to come in 2018? In 2018. #3 BANKS INCREASE FINTECH PRODUCT CREATION Banks forgo partnering in favor of fighting fintech with fintech 37 . personal finance management. and more. Goldman Sachs. alternative lending. banks including Citigroup. and JPMorgan have actively invested in fintech startups across data analytics.Banks are active in Most active US banks investing in fintech fintech investing Over the last few years. 38 . infrastructure. 39 . more are talking up their own digital capabilities Mentions of “technology” and “digital” on bulge bracket bank earnings calls have jumped in 2017.Now. just a year and one month after its launch. The online lender hit $2B in originations in November 2017.Goldman’s Marcus Marcus reached $1B faster than earlier fintechs is the fastest lender Marcus by Goldman Sachs vs. select lending platforms to reach $1B issued Marcus stands out from other alternative lending platforms by offering no-fee loans with flexible payback and installment terms set by the consumer. CB Insights Goldman Sachs Strategy Teardown 40 . Early incumbents backed wealth tech startups Q1’12 – Q4’17 (11/14/17) Lines represent equity investment rounds 41 . Now. incumbents prefer to launch their own robo-advisor instead of white labeling WHITE-LABEL 2017 LAUNCHED 2017 UNDER DEVELOPMENT 42 . 25%. first $10.000 0.Morgan Stanley launches Access Investing and seeks fintech talent to build out new products Management Fees VS. is managed free depending on plan Minimum Investment $500 $0 43 . 0.25% to 0.40%. #4 THE LATEST BATTLEGROUND IN CHINA FINTECH IS WEALTH MANAGEMENT Wealth management will become the hottest fintech sector in China 44 . The opportunity: Total individual investable assets in China grew to $26 trillion in 2016 $4T $6T $10T $13T $17T $26T 2006 2008 2010 2012 2014 2016 Source: Bain and China Merchants Bank. China Private Wealth Report 45 . 2017 46 .INTERNET GIANTS ARE ALREADY MOVING IN In 2017. Ant Financial’s Yu’e Bao became the largest money market fund in the world… $140B AUM $233B AUM JPMorgan US Government Money Market Fund Yu'e Bao Data as of December 14. 2017 | 47 .Tencent has gradually expanded into wealth management Tencent leads $146M to Chinese stock- trading app June 13. 993M Annual funding to Chinese alternative lending startups $1.But wealth tech in China is still a nascent category when it comes to venture investment $3.024M Annual funding to Chinese wealth $664M tech startups $155M $146M $67M $46M 2014 2015 2016 2017 48 .031M $1. Interactive Brokers. the largest US electronic broker by trades. portfolios globally. is a strategic investor. Source: 36kr 49 .Startups are allowing Chinese investors to access overseas securities FUTU SECURITIES TIGER BROKERS The Tencent-backed startup has raised over $215M to allow The online stock brokerage startup provides a platform for mainland Chinese users to use its smartphone app to trade Hong Chinese-speaking investors to access cross-border investment Kong and US stocks. along with and investing. Source: 36kr 50 . tools and wealth management products.000 WeChat users who The startup manages a female-focused wealth management access its educational video content about wealth management community with more than 1 million registered users.Startups are engineering new models of engaging with consumers in China about their wealth JANE 7 TALICAI The Shanghai-based startup counts 300. Startups are enabling third-party wealth managers with technology While China’s wealth management industry is still underdeveloped, some startups like NewBanker are hoping to provide technology products for independent wealth management agencies to help with acquisition costs, regulatory rules, and product development. Source: 36kr 51 AS CHINA’S WEALTH MANAGEMENT INDUSTRY UNDERGOES A PARADIGM SHIFT, IT WILL NEED MORE COMPREHENSIVE SOLUTIONS “We are seeing the Chinese wealth management industry go through profound changes. It is moving from fixed-income investments to equity investment, from short-term speculation to long-term investment, from China-focused investment to global opportunities, from investing into single products, single opportunity to comprehensive risk management and comprehensive asset allocation, from managing this generation’s wealth to thinking about succession planning and inheritance.” Ning Tang Founder and CEO, CreditEase 52 #5 EMERGING MARKETS TAKE GREATER SHARE OF EARLY-STAGE FINTECH ACTIVITY Latin America and Southeast Asia will see strong fintech growth 53 Itaú Unibanco. Google/Temasek. THE OPPORTUNITY FOR FINTECH Addressing gaps in the traditional banking model BRAZIL BY THE NUMBERS: SOUTHEAST ASIA BY THE NUMBERS: 85% 120% 84% 480M 90% 30M Brazilians that Typical personal Total loans held Internet users by Internet users on SMEs underserved live in cities loan APR by top five banks 2020 their smartphones by financial system 40% 71% <5% 266M Brazilians excluded from Total retail banking branches Credit card penetration “Financially traditional banking systems controlled by top five banks in Indonesia excluded” people Source: Goldman Sachs. McKinsey Global Institute 54 . South America is outpacing other markets for fintech deals 38 South America 21 21 Australia 17 15 19 14 Africa 10 13 9 7 7 6 4 5 2013 2014 2015 2016 2017 55 . focusing on everything from lending and payments to wealth management and enterprise finance. 56 .Fintechs startups Fintech startups in Latin America go after more verticals crop up in Latin America 2017 saw deals go to Latin American startups focused on the unbanked and underbanked demographics. Venture-backed Latin American fintech startups have cropped up. Founders January 18. Tiger Global Management Brazil-based Nubank is a mobile- only neobank focused on the 60M unbanked and underbanked people in LatAm. QED Investors. In 2017. 2018 | Fund. DST Global.NUBANK IS EXPANDING INTO RETAIL BANKING WITH CURRENT SAVINGS ACCOUNT Nubank launches into digital $455M Disclosed accounts with NuCanta savings accounts Select Investors: Goldman Sachs. Nubank recently announced that it is expanding from credit cards into personal banking. 57 . Nubank reported having *NuCanta projected interest for 12 months approximately 3M customers and 850 employees. Ribbit Capital. Sequoia Capital. Southeast Asia sees record funding in 2017 Funding to VC-backed fintech companies in Southeast Asia grew 151% on a year-over-year basis while deals rose grew 5% year-over-year ($M) 46 44 34 18 8 $34 $20 $170 $87 $218 2013 2014 2015 2016 2017 58 . Alternative lending deals highlight shift of Asia fintech activity to Southeast Asia Asia alternative lending deal share breakdown. 2014 – 2017 9% 7% 10% Other 16% 9% 16% Southeast 17% Asia 12% India 29% 37% 41% China 82% 43% 39% 32% 2014 2015 2016 2017 59 . Go-Pay. Warburg Floodgate. Global. 60 .8 billion $193 million Select investors: Select investors: Sequoia Capital. KKR. users to pay for transactions using RappiCredits. for operating in Mexico. Pincus. a restaurant and grocery delivery app Go-Jek’s payment gateway.Blurring lines between fintech and commerce will enable new innovation in Lat Am & Southeast Asia Total Funding: Total Funding: $1. Meituan-Dianping Y Combinator 50% of Go-Jek’s 16M – 18M active users use Rappi. Foundation Capital. Sequoia Capital. allows transactions 3 – 4 times a day. Google. and Brazil. Tencent. DST Horowitz. Andreessen Temasek. Colombia. #6 SPECULATION OUTPACES ADOPTION IN BLOCKCHAIN More companies will look to sell pickaxes amid cryptoasset speculation 61 . EtherScan 62 . TokenData. Sources: CB Insights.Run-up in crypto Ethereum price run-up boosts investor interest in ICOs prices brings more January 2016 – December 2017 investors. new blockchain projects launched through initial coin offerings (ICOs) brought a crop of new investors. startups As the total value of cryptocurrencies — like Bitcoin and Ethereum — hit new highs in 2017. the company was adding 100.Exchanges see Coinbase attracts speculators in meteoric year massive growth in Number of users.000 users per day. and at one point in November. January 2013 – November 2017 popularity Cryptoasset exchange Coinbase reportedly crossed $1B in revenue in 2017. Alistair Milne 63 . Coinbase’s mobile app hit the top spot in Apple’s Apple Store in December. Sources: Coinbase. Now: Coinbase plans on catering to larger investors $217.” 64 .4M Disclosed Select Investors: Battery Ventures. whose mission is “to make digital currency investment accessible to every financial institution and hedge fund in the world.” Critics argue that this contrasts with Coinbase’s overarching mission to create an “open financial system. Andreessen Horowitz. USV. USAA Coinbase is launching Custody. FirstMark Capital.5M Disclosed Select Investors: Libertus Capital. In 2017. GDTRE Ledger sells hardware wallets that allows users to store cryptoassets. Ledger reportedly grew revenue to €46M. up from €600K euros the year prior. 65 .Wallets also surge in popularity in current market $83. TokenData 66 . Blockchain equity funding pales in comparison to ICOs more blockchain Quarterly equity and ICO financings ($B). Sources: CB Insights.6B has been invested in equity financings to blockchain startups. more companies will look beyond their initial use cases to enable and expand investment and trading.As winners emerge. despite many failing to attract a critical mass of users. Q1’16 – Q4’17 startups will change their tune Over $2. As crypto speculation continues. Ignia Fund September 2017 Abra once touted itself as a means of sending payments around the globe. 67 . RRE Ventures. but has recently shifted its position toward investing.Abra pivots to cryptocurrency investing January 2018 $30M Disclosed Select Investors: Boost VC. First Round Capital. and trades over $2B per month in cryptoassets. not money transfer $136M Disclosed Select Investors: Baidu. The company has found more success with its OTC trading business. IDG Capital. General Catalyst. 68 .Circle focuses on OTC trading. Goldman Sachs Circle initially advertised itself primarily as a mobile blockchain remittance and payments platform. #7 FINTECH GOES UNDER THE HOOD TO BUILD A NEW FINANCE ENGINE Capital markets fintech infrastructure becomes a focus area for investment 69 . THE FINTECH FOR BANKS Fintech infrastructure helps startups and banks 1 2 3 REPLACING LEGACY CENTRALIZE DISPARATE CREATING AN OPEN INFRASTRUCTURE CUSTOMER DATA BANKING PLATFORM Startups help firms leverage the cloud Startups are taking a picks-and-shovel Startups leveraging APIs help to reduce the costs of delivering approach to offer developers tools to help developers increase their time to market financial services and tools to both banks and fintechs to centralize with new financial products and customers customer data and services services and reduce development costs 70 . Further.Legacy technology Legacy capital markets technology systems stifle market innovation Legacy technologies are pivotal in the functioning of the capital markets ecosystem. incumbent players have been slow to innovate if at all. yet on average are ~38 years old and have remained static. 71 . startups working on capital markets infrastructure companies will be pivotal to overhauling legacy technologies by leveraging cloud computing and newer programing languages.Fintechs are going Fintech are going B2B with capital markets tech under-the-hood to jumpstart markets The back office is often overlooked in favor of revenue- generating groups in the front office. As legacy systems start to sunset. 72 . DRIVING THE BANKING AS A PLATFORM MOVEMENT Last Funding $44M Series B // Q2’16 Plaid's suite of API tools allows developers to integrate with bank infrastructure and access and authorize user bank accounts at a reported 9. BoxGroup. Spark Capital 1 2 3 User logs in to their Plaid connects with Plaid Stays connected SELECT CUSTOMERS favorite financial underlying bank and to the bank to seamless tracking application pulls truncation history connected usage 73 . Goldman Sachs. Citi Ventures. New Enterprise Associates.600 financial institutions Select Investors American Express Ventures. DRW Venture Partners.000 DESKTOPS COVERING 35 GLOBAL BANKS AND FIRMS Last Funding $15M Series B // Q1’17 Openfin is an HTML5 container that powers B2B desktop applications for financial services applications.. J.OVERHAULING 125. Chase & Co. Nyca Partners SELECT CUSTOMERS 74 . Euclid Opportunities. Morgan VS. Select Investors Bain Capital Ventures.P. CENTRALIZING CUSTOMERS DISSIPATE FINANCIAL DATA WITH OPEN API’S Last Funding $10M Series B-II // Q2’17 Quovo is a data platform that leverages a robust suite of APIs & modular applications to aggregate financial data across 13. Long Light Capital.000+ financial institutions Select Investors F-Prime Capital. FinTech Collective. Napier Park Global Capital SELECT CUSTOMERS 75 . NEA 76 . MORE FINTECH INFRASTRUCTURE TO COME “The products being built…demonstrate that improving the infrastructure layer is the key to driving further financial progress.” Rick Yang Partner. #8 REGTECH SEES BROADER ADOPTION Banks deepen partnerships and investments in regtech 77 . 8 BILLION ACROSS 176 DEALS 78 .VC-BACKED REGTECH IN FINTECH EQUITY FUNDING SINCE 2013: $1. and plot the • 12 January 2018: Revised Payment Services Directive (PSD2) arc of rising expectations and • 25 May 2018: General Data Protection Regulation (GDPR) excitement around emerging technologies. predict. 79 .REGULATION IS A GROWING CONCERN AS COMPLIANCE DEADLINES APPROACH Concern over pending regulation increasing CB Insights Trends mines a KEY REGULATORY IMPLEMENTATION DATES massive corpus of media articles to enable a data- • 3 January 2018: Markets in Financial Instruments Directive II (MiFID II) driven. real-time method to • 3 January 2018: The Markets in Financial Instruments Regulation (MIFIR) discover. Revised Payment Services Directive (PSD2) open-acess article is an open door for fintechs BEFORE AFTER 80 . 5M (Series A) Disclosed Funding: $4.2M (Seed) Select Investors: EQT Ventures. Octopus Select Investors: Anthemis Group. Connect Select Investors: Firestartr Ventures. Plug and Play Ventures Ventures Upcoming Deadline: January 2018 European Union member states transpose PSD2 as law 81 . OP Financial Group.3M (Series A) Disclosed Funding: $1. Fintech are taking dynamic approaches to compliance Focus: Token is an open banking platform on the Focus: TrueLayer is an API platform for Focus: Railsbank is an open banking and blockchain leveraging smart contracts to developers to access bank data they need to compliance platform targeting both monetize access for banks from TPPs build new apps and services developers and banks Disclosed Funding: $18. 82 .Banks’ investment in Banks are actively making investments in regtech regtech is still in 2012 – 2017 early stages Banks such as Santander. and Goldman Sachs are some of the earliest to invest in regtech startups. Banks have made investments in products & services that range from identification and background checking software to blockchain and trade monitoring. Barclays. Investors back compliance solutions they need Banks co-invested to meet research unbundling requirements of MiFID II & MIFIR INVESTORS ACQUIRED $38M Series B // Q1’18 $68M Total 83 . …and banks are their primary customers Banks co-invested to meet research unbundling requirements of MiFID II & MIFIR INVESTORS USERS Disclosed Funding: $16M Series A Deadline: January 2018 MiFID II and MiFIR apply within Member States 84 . There’s no shortage of pending regulation 2016 REGULATORY HIGHLIGHTS GLOBAL REGULATORY INITIATIVES 2015 – 2019 2017 REGULATORY HIGHLIGHTS • Markets in Financial • Fiduciary Rule United States Instruments Directive II (MiFID • Dodd-Frank Act II) • Consolidated Audit Trail • The Markets in Financial (CAT) Instruments Regulation (MIFIR) • Revised Payment Services Directive (PSD2) • General Data Protection Regulation (GDPR) Source: Moody’s Analytics 85 . EUROPE IS A HOTBED FOR REGTECH STARTUPS FOCUSED ON FINANCIAL SER VICES 60+ European regtechs in financial services 86 . but believe that it is imperative for all involved stakeholders to do their part in understanding emerging technologies and think creatively about incorporating such technologies. Christopher Giancarlo CFTC Chair 87 . REGULATORS WILL NEED TO UPDATE THEIR OWN TECH STACK TO KEEP PACE “Regtech poses significant opportunities for both participants and regulators.” J. I suspect we are in the ‘early innings’ of this space. AS REGTECH DIGITIZES COMPLIANCE FOR FIRMS. #9 STARTUP BOOM IN INSURANCE DISTRIBUTION ABATES Insurance tech investment moves to back-end 88 . 000 250 $2.688 $1.000 150 124 $1.500 202 200 174 $2.212 $. ($M) $3.682 $2.000 65 46 50 $500 $348 $271 $868 $2. Global insurance tech deals rose 16% year-over-year in 2017.500 94 100 $1. 0 2012 2013 2014 2015 2016 2017 89 . Insurance tech: Over $8B invested since 2012 Insurance tech startups continued to be a hot area for fintech investment in 2017. GV. Flare Capital Technology Investment Catalyst Management. Greycroft Partners. Holdings Investments. Amount: $50M Investors: Fairfax Financial Investors: Two Sigma Private Goldman Sachs. Nova Four Rivers Group. Bessemer Management. EPIC Insurance H&Q Asia Pacific. Amount: $77M Investors: Leadenhall Capital. Sequoia Capital 90 . General Investors: Wellington Punter Southall Group Venture Partners. The largest deals in 2017 went to companies providing insurance… UK-based digital life insurance Consumer-driven health insurer Medicare Advantage PPO Digital home insurance carrier Online insurance comparison in provider Amount: $160M Amount: $130M Amount: $120M India Amount: $230M Investors: NEA. Info Edge. Investors: Greenoaks Capital Investors: Softbank Group. Investors: Altimeter Capital. Cross Creek Advisors. Western Thrive Capital. Brokers Founders Capital Greenspring Associates. GV. SBI Group. Alibaba Group. True North. IDG Ventures India Medicare Advantage startup Digital general insurance HR benefits platform for small Online insurance comparison HR software provider and Amount: $62M carrier in India businesses Amount: $50M benefits brokerage Investors: Venrock Amount: $60M Amount: $60M Investors: IFC. …but distribution-focused startups will run into a funding crunch as winners emerge 90 Early-stage activity remains high in insurance… 80 70 60 50 Deals …But mid-stage activity has stayed consistent over time 40 30 20 10 0 2012 2013 2014 2015 2016 2017 Seed/Angel Series A Series B Series C Series D Series E+ Other 91 . M&A not likely to help much Only 12% of (re)insurance and investment professionals with knowledge of their company’s innovation strategy believe acquisitions are their organization’s primary outlet for innovation. Partner 40% Build 48% Buy 12% CB Insights / Willis Towers Watson Insurance Incumbent InsurTech Strategy Survey 92 . including IT. 2017 | complement our general need to build institutional consensus. most Cyence customers] described it having very modest or Aon partners with Clara to no IT involvement involved in the selection deliver claims tools to workers and contracting process. before a company moves forward with us. We see that as an comp insurers intriguing go-to-market motion that could October 12. REINSURERS “[In our diligence process.Back-end startups are finding more ways into insurers REDUCING IT INVOLVEMENT PARTNERING WITH BROKERS.” Guidewire CEO Marcus Ryu on $275M acquisition of Cyence in October 2017 93 . Source: Shift Technology 94 . Elaia Partners. Iris Capital Paris-based Shift Technology provides SaaS for detecting potential insurance fraud. The company has reportedly grown to 45 clients and processed more than 100M insurance claims. General Catalyst.CLAIMS IS AN AREA OF FOCUS FOR BACK-END STARTUPS $40M Disclosed Select Investors: Accel. #10 BANK OF AMAZON? Amazon gets more aggressive in fintech — outside of the US 95 . Andreessen Horowitz 96 . If Amazon can get you lower-debt payments or give you a bank account. you’ll buy more stuff on Amazon. WHY NOT BANK FEES? “Amazon is the most formidable.” Alex Rampell General Partner. AMAZON CAN UNDERCUT ON PRICES. Amazon has already developed key beachheads into financial services… PAYMENTS SMALL BUSINESS LOANS 33M+ users of Amazon Payments $3B lent to small businesses on Amazon since 2011 CASH DEPOSITS MEMBER REWARDS 97 .In the US. But Amazon’s US efforts are a far cry from Tencent and Ant Financial’s global fintech forays in China TENCENT & ANT’S FINTECH INVESTMENT & M&A ANT FINANCIAL BY THE NUMBERS 520M Annual active users >330M Cumulative users 392M Annual active users 257M Activated Investment users M&A Source: Alibaba Group Investor Day Presentation 98 . innovative products that will provide excellent customer experience and satisfaction.In Europe. Amazon runs product insurance white label Amazon Protect “We have ambitious plans to significantly grow operations in our current markets and create new.” — September 2017 job posting for Amazon Protect product manager position 99 . digital services including food delivery. Amazon is rolling out doorstep cash pickup to allow In Mexico. and mobile recharges. 100 . Amazon is going deeper into payments in growth markets INDIA MEXICO In India. Amazon launched a cash payment service to attract users to load money into its digital payment wallet Amazon Pay. customers online and give shoppers an alternative to credit and The service allows users to top up their balance using cash for debit cards. bill payment. What’s next? AMAZONS’ FINTECH INVESTMENT & M&A AMAZON IN THE NEWS India Investment M&A 101 . Amazon is on the prowl for fintech startups. In India. APPENDIX 2017 global fintech year-in-review 102 . 6 BILLION ACROSS 1.128 DEALS 103 .GLOBAL FINTECH VC-BACKED EQUITY FUNDING IN 2017: $16. 065 $801 $377 $2.676 $1.765 $1.794 $1.570 $8.Europe fintech funding grew over 120% in 2017 Global VC-backed fintech funding share by country 2013 – 2017 ($M) +121% YoY $2.262 $6.837 2013 2014 2015 2016 2017 North America Asia Europe Africa Australia South America 104 .127 $5.438 $1.281 $5.891 $7.583 $5.210 -10% YoY $4. US FINTECH VC-BACKED EQUITY FUNDING IN 2017: $7 BILLION ACROSS 426 DEALS 105 . US fintech deal activity falls 14% in 2017 While six fintech companies achieved billion-dollar valuations for the first-time in the US.6 $7.4 $8.0 2012 2013 2014 2015 2016 2017 Amount ($B) Deals 106 . total VC-backed deals to US-based fintech companies slipped to 4-year low in 2017 492 493 454 426 384 293 $1.0 $5.8 $2.4 $5. 7 BILLION ACROSS 297 DEALS 107 .EUROPE FINTECH VC-BACKED EQUITY FUNDING IN 2017: $2. 2 $2.3 $1.3 $0.Europe sees record for fintech investing in 2017 There were 2.75x as many deals to VC-backed fintech companies in 2017 as there were in 2012. 297 203 186 135 89 79 $0.8 $1.8 $1.7 2012 2013 2014 2015 2016 2017 Amount ($B) Deals 108 . ASIA FINTECH VC-BACKED EQUITY FUNDING IN 2017: $5.8 BILLION ACROSS 290 DEALS 109 . 4 $1.Asia sees fintech funding recede in 2017 While funding to VC-backed fintech companies in Asia fell 9% on a year-over-year basis. deals rose 25% 290 232 197 138 75 $0.8 2013 2014 2015 2016 2017 Amount ($B) Deals 110 .1 $6.4 $5.1 $4. 49B Valuation) Capital. GPI Online lending platform ($4.46B Valuation) Investment.Top 10 global fintech deals in 2017 SoftBank led or participated in three of the top 10 deals to VC-backed fintech companies in 2017 Deal Date // Total Disclosed Company Amount Funding (M) Select Investors Description May’17 // $1.4B $2. Yisheng Innovation Nov’17 // $280M $396M Andreessen Horowitz. Index Digital P2P money transfer platform ($1. Silver Lake Partners Jun’17 // $300M $574M MasterCard Worldwide.2B SoftBank Group. and accounting software ($1. expense management.6B Valuation) Ventures. Billing.7B SoftBank Group Mobile payments and commerce platform ($7B Valuation) Feb’17 // $500M $2. Valar Ventures 111 .24B Valuation) Temasek Holdings provider May’17 // $292M $347M China Minsheng Peer-to-peer (P2P) lending platform ($1. China Construction Bank. Khosla Alternative lending platform for point-of-sale financing Ventures. International Finance a focus on China and Singapore Corporation. Lightspeed Venture Partners. Thomvest Ventures Aug’17 // $220M $439M China Minsheng Peer-to-peer (P2P) loan and financial services platform Investment. retail. Ribbit Capital. Spark Capital Dec’17 // $200M $610M QED Investors. Dec’17 // $200M $725M Founders Fund. TPG Capital home improvement. Roark Consumer finance marketplace. and healthcare industries 112 . Simone for small and medium enterprises in China Investment Managers Nov’17 // $220M $425M Alibaba Entrepreneurs Mobile lending platform serving customers in Asia with Fund. BlueRun Digital small and medium sized business (SMB) lender Ventures. specializing in the ($1.45B SoftBank Group.78B Valuation) Capital Group.Top 10 global fintech deals in 2017 (continued) Alternative lending companies made up 7 of the top 10 deals in 2017 Deal Date // Total Disclosed Company Amount Funding (M) Select Investors Description Aug’17 // $250M $2. The most active fintech VCs in 2017 By unique fintech company investments (new or follow-on) Rank Investor Select 2017 Fintech Investments 1 2 3 3 3 113 . The most active fintech VCs in 2017 (continued) By unique fintech company investments (new or follow-on) Rank Investor Select 2017 Fintech Investments 7 7 7 10 10 114 . 95B $345M Matrix Partners China. Huasheng Capital. Yunfeng Capital 115 . Sailing Capital. Ping An Insurance. Tencent. CDH (6060. Temasek Holdings. China (NASDAQ: LX) Renaissance Capital. Sequoia Capital China.9B $954. Alibaba Group. K2 Ventures.3B $186M KPCB China.9B $101. CICC. Keywise Capital. DST Global. Morgan Stanley. JD. SIG Asia Investments IPO Q4’17 // $1.7M Ant Financial Services Group.com. Legend Capital.Chinese firms drive fintech IPOs in 2017 Largest investor-backed fintech IPOs in 2017 Total Disclosed Funding (M) Company Exit Type Deal Date // Valuation Valuation Pre-Exit Select Investors IPO Q3’17 // $11B $931M Alibaba Group. Lightspeed China (NYSE: JT) ($808M Valuation) Partners.HK) ($8B Valuation) Investments. Zero2IPO Capital.22B Valuation) Wealth Holding Group. Bertelsmann Asia Investments IPO Q4’17 // $1. Beijing Phoenix (NYSE: QD) ($1. Lightspeed (NYSE: PPDF) China Partners. SAIF Partners IPO Q3’17 // $7.3M Sequoia Capital China. Hangzhou Liaison Interactive and Kunlun Worldwide IPO Q4’17 // $3. 400M $74.2M Integrated payments provider for SaaS and crowdfunding platforms Q4’17 // $275M $40M Cyber risk modelling and analytics Q1’17 // $100M N/A Offline-to-online payments Q1’17 // $100M N/A Mobile banking services 116 .No billion-dollar fintech M&A in 2017 Notable investor-backed fintech acquisitions in 2017 Total Disclosed Company Deal Date // Valuation Funding (M) Acquirer Description Q3’17 // $850M $174.8M Cloud financial management software Q4’17 // $220M . with the exceptions listed. — No debt / loans of any kind (except convertible notes). Grants. All three of these transaction types are JD. is not included. only the $8M is included in our data. ― Previous quarterly VC reports issued by CBI have exclusively included VC-backed rounds. whether transferable into equity now. or public-private partnerships to emerging startup companies are not included. they are investment from Sequoia Capital China in Q1’16. As a result. also known as PIPEs (Private Investment in Public does a second closing of its Series B round for $5M and previously had closed $2M in a Equities). If a company — No private placements. Additionally. if you feel your firm has been under-represented. In this report. which are defined as companies who have received funding at any point from certain milestones but first gets $8M. Fundings are verified via various federal and state — No government funding. If a company receives a commitment for $20M subject to hitting companies. loans. venture capital firms. direct confirmation with firm or investor. only the $2M is included. If a company receives $3M with $2M from venture investors and which has closed. later. Note: For the purposes of this analysis. this is not equity kind on any exchange (including Pink Sheets) are excluded from our numbers. ― Only verifiable fundings are included. excluded for the purposes of this report. ― Only includes the investment made in the quarter for tranched investments. If you have any questions about the definitions or methodological principles used. or equity financings by the federal government. Funding rounds raised by public companies of any never. please send an email to info@cbinsights. These investments. agencies. we encourage you to reach out to CB Insights directly. even if included as an additional part of an equity the closing of $5M out of a desired raise of $15M. or ― Fundings of only private companies. or super angel investors. Venture debt or any kind of debt / loan ― Round numbers reflect what has closed — not what is intended. However. and/or recapitalizations. What is included: What is excluded: ― Equity financings into emerging fintech companies. Fundings must be put into VC-backed — No contingent funding. only the $5M is reflected in our results.com and we can work together to ensure your firm’s investment data is up to date. even if they financing nor is it from a venture capital firm. any rounds raised by VC-backed companies are included. consolidations. — No buyouts. received investment by a venture firm(s). our numbers reflect only the amount financing. state regulatory filings. Methodology CB Insights encourages you to review the methodology and definitions employed to better understand the numbers presented in this report. it is not included. 117 . — No business development / R&D arrangements. corporate venture groups. are excluded even if made by a venture capital firm(s). prior quarter.com’s finance arm JD Finance and its $1B financing were included in the data per its commonly employed by private equity firms and are tracked by CB Insights. or press release. $1M in debt. If a company signs a $300M R&D partnership with a larger corporation. If a company indicates issued to emerging startup companies. WHERE IS ALL THIS DATA FROM? The CB Insights platform has the details on all the data included in this report CLICK HERE TO SIGN UP FOR FREE 118 .