For Payments Startups, Is Timing Everything?

By Pete Rizzo (@pete_rizzo) 

Between Clinkle’s $25 million venture round, Braintree’s $35 million Series B and Kabbage’s $30 million Series C, the payments industry has seen no shortage of headline-making funding rounds so far this year.

Each of these companies is making headway toward the next great disruption in the industry – and perhaps more importantly, they’re vying for the funding that will allow them to do it. But, in the case of these payments startups, could timing also have been a factor?

Released this summer, a study from FinTech Innovation Lab, Accenture and the Partnership Fund for New York City revealed that roughly 44 percent of all fintech deals were awarded to payment startups in the first and second quarter of 2013. Payments was far and away the leading fintech category in terms of the total share of fintech deals it has garnered during this time, passing banking and corporate finance startups and data analytics startups.

The study further revealed insights into how payments financing activity has fluctuated by quarter since the second quarter of 2008. The result is a wide-angle view of how today’s VCs invest in the payments industry.

As illustrated by this PYMNTS.com Interactive Data Point, the total amount of payments funding as well as the number of fintech deals involving payment companies has been on a steady, if uneven, upward trend.

Viewed over this time span, the data suggests payments investors are more inclined to invest in payments companies at the start of the fiscal year, in either the first or second quarter, as the average funding during this time was also shown to be greater.

However, the data suggests this may simply be because of an overall upward trend in the number of deals and financing. per quarter. The number of payments fintech deals rose from 75 in 2009 to 159 in 2012. The study did not provide data for the third and fourth quarter of 2013.

For more insights and analysis on how VCs view the payment industry, read FinTech Innovation Labs’ full report here.