B2B Payments

With VCs Retreating From FinTech, Will B2B Hold Out?


Investors’ interest in FinTech could be disintegrating. The latest research from CB Insights revealed that, despite a year of FinTech unicorns — startups valued at $1 billion and up — just nine technology firms earned that label in 2015’s fourth quarter, compared with 23 unicorns that emerged in both the second and third quarters.

According to CB Insights Cofounder and CEO Anand Sanwal, that drop was anticipated, though not quite as dramatically as how it occurred.

“Sentiment got very negative” among tech investors as the fourth quarter approached, the executive told reporters. “And while we expected that would manifest in the funding stats, we were surprised to see the hit so quickly — in just the next quarter.”

CB Insights’ data reveals VCs reduced interest in FinTech in other ways, too. Square’s 42 percent drop in IPO value in November, for instance, was a major indicator that the FinTech market isn’t living up to its hype of yesteryear.

And, according to analysis, there were just 39 fundraising rounds in 2015’s fourth quarter worth at least $100 million; that compares to 72 deals in the third quarter, reports said. Overall, VC funding dropped by 29 percent in Q4, down to $27.3 billion from the previous quarter’s $38.7 billion worth of deals, researchers showed.

Earlier reports by Forbes this week came to similar conclusions that VCs may turn their backs on the FinTech sector.

[bctt tweet="VCs may turn their backs on the FinTech sector."]

Will B2B Hold Out?

What does this mean for FinTech innovators in the B2B finance and payments sector? It’s a segment that rarely sees a unicorn, though it does happen; last year, procurement and treasury management firm Coupa became the industry’s most well-known $1 billion valuation in June.

It’s unclear whether the B2B FinTech startup space will see a hot or cold year in venture capital. This week, the industry started the year off with just two deals.

In the year’s first B2B venture capital investment, India-based ProcMart, an online B2B eCommerce platform, secured venture capital from one of its biggest peers, IndiaMART.

Reports on Tuesday (Jan. 5) revealed the funding, but the companies didn’t disclose how much money was provided.

IndiaMART Founder and CEO Dinesh Agarwal provided the backing to help ProcMart secure new suppliers and reach new corporate buyers. The executive told reporters that he has high hopes for eProcurement.

“The B2B procurement space has a lot of scope. I think I can help these businesses a lot,” he said, adding that he has been focusing his backing on companies that are more focused on the technology of B2B eCommerce and procurement, more so than the execution of it. Agarwal’s own B2B eCommerce site, IndiaMART-owned Tolexo, said last year that it anticipates reaching the $1 billion mark in gross merchandise value sometime in 2017.

Talk of disruption in FinTech driven by blockchain technology continues to mount, and one U.S. startup has just achieved funding thanks to the attention. Gem, a blockchain platform provider, announced Wednesday (Jan. 6) a $7.1 million funding round spearheaded by Pelion Venture Partners.

According to reports, backers also included KEC Ventures, Blockchain Capital, Digital Currency Group and RRE Ventures, among others.

Gem CEO Micah Winkelspecht announced the funding with remarks about the potential for the blockchain to overhaul the entire market structure. “We believe blockchain technology will transform how people and companies interact,” he said. “It will underpin entire industries and one day produce a blockchain economy that will form the underlying architecture of our daily lives.”

Pelion Venture Partners Partner Ben Dahl added that Gem is not only promoting the development of blockchain-based tools but also “advancing blockchain use cases in larger enterprises.”

Gem’s announcement also noted that the blockchain industry is expected to see an additional $1 billion in venture capital in 2017 and has already seen nearly $1 billion in backing since 2013.

VCs are taking a breather from their massive investments in FinTech startups, the data suggests. But with continuing talk of blockchain technology and with the B2B payments space slowly gaining attention among innovators, it’s possible this segment may not have such a bad year.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.