Using CB Insights data, we highlight some of the key takeaways from our Q1’23 State of Fintech report, including:

1. Global fintech funding grows 55% QoQ in Q1’23; $6.5B is raised by Stripe alone. 
2. Early-stage deal share reaches 72%, a new high.
3. Unicorn births fall to 1 for the first time since 2016. 
4. Fintech M&A exits rebound, increasing 15% QoQ. 
5. Banking funding and deals hit lowest levels since Q2’17. 

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While big banks like Bank of America, Citigroup, and Goldman Sachs were quick to place restrictions on employee use of OpenAI’s ChatGPT in February 2023, other financial firms have jumped at the opportunity to leverage the tech. 

For example, Morgan Stanley is using OpenAI-powered chatbots to assist financial advisors as a knowledge resource that leverages the firm’s internal repository of research and data. Hedge fund Citadel is reportedly in talks for an enterprise-wide ChatGPT license that will be used for software development and information analysis. 

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At the same time, financial innovation, rapid advances in AI modeling, and new digital customer data streams are making the nature of regulatory and compliance management significantly more complicated.

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In an effort to boost growth, Santander has acquired, partnered with, and invested in fintech companies that enable better customer experiences, make it easier to access credit, and help businesses manage their finances. It has also launched new tech-forward payments and banking products (such as PagoNxt) and stepped into digital asset trading.

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Crypto asset management companies provide passive crypto investment strategies to institutional clients. Examples include single- and multi-asset crypto index funds, trusts, exchange-traded funds (ETFs), and separately managed accounts.

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Institutional staking companies in this market offer yield generation for institutional investors through staking, where crypto assets are allocated to process transactions and secure protocols (e.g., Ethereum) in exchange for rewards.

Staking providers run nodes (a requirement to stake) as a service for clients, eliminating the technical overhead that institutional investors face when setting up and managing their own nodes.

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The retirement investment market includes companies that aim to improve advisors’ retirement offerings by providing payroll integrations and other retirement-focused portfolio-building solutions within the same platform. Most of the solutions focus on end-to-end retirement planning and cater to financial advisors and employers that want to integrate streamlined retirement offerings with their human resources systems.

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The alternative investment market encompasses any investment opportunity outside of traditional stocks and bonds, such as private equity, hedge funds, real estate, and digital assets. Business-to-business (B2B) companies in this market provide financial advisors and portfolio managers with access to alternative investment opportunities as well as related educational material that they can integrate into their client portfolios.

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According to SVB, its clients account for 71% of all fintech IPOs since 2020. It’s clearly plugged into the fintech ecosystem.

The fallout from recent events may leave a hole in fintech that won’t easily be filled. While moving to a new bank for your deposits might be simple, searching for and setting up a payment rails and processing partner is a more difficult process.

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Fintech was Sequoia Capital’s top investment category in 2022, representing nearly a quarter of the firm’s deals.

Using CB Insights data, we mapped how Sequoia Capital spread its 2022 fintech investments across categories like capital markets, personal finance, real estate, and more.

CB Insights clients can dig deeper into all 25 deals listed above as well as explore Sequoia Capital’s bets beyond fintech using this CB Insights platform search.

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But as the year progressed, the crypto winter coupled with macroeconomic pressures caused 3 straight quarters of declines in funding and deals.

Below, take a look at a few highlights from our 162-page, data-driven State of Blockchain 2022 Report. For deeper insights and all the private market data, download the full report.

2022 highlights across the blockchain ecosystem include:

• Blockchain venture funding grew 4% year-over-year (YoY) to reach $26.8B in 2022 thanks to a strong H1. ​
• The average deal size to blockchain startups fell 24% YoY to $16.2M in 2022, driven by a sharp drop in $100M+ mega-rounds throughout the year.
• The blockchain unicorn count stalled out at 79 at the end of 2022, with just 2 new unicorns in Q4’22.
• Web3 startups accounted for 56% of blockchain venture funding in 2022, up from 39% last year.
• Blockchain infrastructure & development had a record year for funding ($7.8B) and deals (235) in 2022, signaling investor confidence in blockchain’s future irrespective of cryptocurrency volatility.
• Venture funding to crypto exchanges & wallets fell 48% YoY in 2022, revealing a clear shift in investor sentiment away from centralized exchanges.

Download our 2022 State of Blockchain Report to dive into all these trends and more.

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However, some top investors like Andreessen Horowitz (a16z) remained active in the space across various deal stages, valuations, geographies, and sub-industries. 

Fintech is central to a16z’s investment strategy. In recent years, the firm has not only shored up its presence in more familiar sectors like banking, but also reached deeper into newer territory like blockchain. 

Of the 206 deals a16z participated in last year, almost a quarter went to fintech companies — more than any other industry. Sixty percent of these fintech investments closed in H1’22, and the remaining 40% closed in H2’22.

Using CB Insights data, we mapped how a16z spread these fintech investments across categories like payments, blockchain, digital lending, and more. 

Below, we dig into a16z’s top 3 fintech targets in 2022, including key deals in each category.

Payments 

More than a quarter (28%) of a16z’s fintech investments in 2022 went to the payments category. Notable investments include:

• SpotOn ($300M Series F): SpotOn offers a cloud-based platform that provides payment solutions for restaurants and small retailers. 
• Jeeves ($180M Series C): Jeeves offers corporate cards and other expense management tools for businesses, with a focus on credit and payments rails across countries and currencies.
• Tally Technologies ($80M Series C): Tally’s app helps consumers pay off credit card debt more quickly by automating payments.

Blockchain

a16z has actively invested in companies developing blockchain platforms for years. In 2022, 22% of its fintech deal volume went to blockchain companies — although most of these deals closed between January and June, before the year-end turmoil that rocked the cryptocurrency markets. Notable investments include: 

• Matter Labs ($200M Series C): Matter Labs is an Ethereum development company building a rollup layer 2 network designed to lower fees and speed up transactions. 
• Lightspark ($175M Series A): Lightspark, launched in May 2022, is building a Bitcoin payments tool.
• NEAR Protocol ($150M Series B): NEAR Protocol is developing a platform for blockchain-based decentralized applications, with a heavy focus on Web3.
  

Digital lending

a16z’s third-most popular fintech category in 2022 was digital lending, accounting for 12% of the firm’s fintech deal flow. Notable investments include: 

• Point Digital Finance ($115M Series C): Point provides a lending marketplace that allows homeowners to borrow against a percentage of the future value of their property.
• Valon ($60M Series B): Valon offers residential mortgage loan servicing technology through a cloud-native platform. 
• Vesta ($30M Series A): Vesta provides a platform for mortgage origination and underwriting that is designed to streamline processes, reduce risk, and help lenders improve their book of business. 

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Overall, deals fell 8% year-over-year to reached 5,048 in 2022. Africa was the only major region to see deals increase compared to 2021.

Below, check out a handful of highlights from our 178-page, data-driven State of Fintech 2022 Report. For deeper insights, all the record figures, and a ton of private market data, download the full report.

Other 2022 highlights across fintech include:

• $100M+ mega-rounds accounted for $36.5B in funding in 2022, marking a 60% drop from 2021.
• Banking funding declined 63% YoY — the sharpest drop across fintech sectors analyzed — to return to pre-Covid levels.
• US fintech funding fell 50% YoY to $32.8B. Despite the drop, 2022 was the second-highest funding year for US fintechs on record.
• Africa-based fintechs saw a record 227 deals in 2022, a 25% increase YoY.
• Insurtech M&A exits reached a new high, rising 40% in 2022 to 81 deals.
• Fintech unicorn births steadily declined throughout 2022, sinking to a low of 5 new unicorns in Q4’22 — an 87% drop compared to Q4’21.

Download the full State of Fintech 2022 Report to dig into all these trends and more.

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Given the turmoil of 2022, institutional investors in crypto have two major priorities: quality and trust. Quality involves compliance, security, and levels of return on investment. Trust involves transparency that a provider’s assets cover their liabilities, and that customer funds are safe and can be withdrawn. 

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The tech giant has other ideas.

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A total of 134 affiliated companies were part of the filing, and there could be more than a million creditors involved. 

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The continent’s antiquated banking system (serving mainly the affluent) and largely underbanked population have created the perfect breeding ground for fintech growth, speeding up both development and adoption of new technologies.

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Canada-based fintech startups — several of which have made it onto CB Insights’ annual Fintech 250 list of promising companies over the years — are building products across a broad range of applications, including payments, lending, banking, wealth management, blockchain, and more.

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Nevertheless, continued investment and partnership activity in the space highlight emerging technologies that are helping firms use data to improve efficiency and maximize planning process outcomes. These technologies enable capital markets firms not only to adapt to market volatility, but also to pursue new growth opportunities.

Using CB Insights data, we surface 3 capital markets tech trends to watch and highlight what’s next across:

• Equity management practices
• ESG reporting requirements
• Trade analytics and execution

EQUITY MANAGEMENT PRACTICES

Tech to watch: Equity management platforms

Why we’re paying attention: Three of the top 10 capital markets tech deals in Q3’22 went to companies developing equity management platforms, which offer technology for companies and their stakeholders (e.g., investors, law firms, etc.) to manage data related to shareholder equity over time.

These platforms simplify administrative efforts — across areas like accounting, human resources, and legal — and employ data and software modules to help companies plan for future equity changes (such as before a funding round).

Raising $40M in a Series B deal, Pulley offers an equity management platform that enables startups to manage cap tables and fundraising activities. The company also partners with law firms, which offer Pulley’s service to their startup clients.

Meanwhile, Switzerland-based Ledgy, which raised $23M in a Series B, enables startups and investors to automate and manage equity activities across international environments. In addition, the company offers an analytics module that allows firms to model potential funding and exit scenarios.

Quotabook, a South Korea-based equity management platform that raised $11M in a Series A, also targets both investors and startups. For investors, the platform includes broader solutions for fund and portfolio management.

Why it matters: Companies use these platforms to manage existing equity structures, as well as plan for changes to equity related to future funding rounds. Funding to these 3 companies follows a record year for venture investment in 2021, which suggests a strong, ongoing need among startups for solutions to manage equity given the influx of capital.

What’s next: Although funding is down from 2021 highs, startups will continue to raise funding to fuel growth. For instance, half of insurtechs plan to raise funding in the next 12 months. Expect continued demand for equity management solutions that help with preparation for future funding rounds.

ESG REPORTING REQUIREMENTS

Tech to watch: ESG intelligence

Why we’re paying attention: ESG intelligence technology helps capital markets firms gain insight from ESG-related data. This can support firms’ reporting on progress to meet environmental, social, and governance (ESG) standards.

Demand for ESG reporting is growing as investors, ratings agencies, and regulators push for firms to adopt ESG standards. News coverage of ESG reporting has grown dramatically, more than doubling over the past 2 years.

Q3’22 saw 1 early-stage deal and 1 exit among ESG intelligence companies:

• In August, Worldfavor raised a $10M Series A round. Worldfavor offers a SaaS platform for firms to manage ESG-related information, including capabilities for sustainable investment monitoring.
• alva uses machine learning and natural language processing to help firms understand ESG-related risks and build ESG profiles. The company merged in September with several research and analytics firms to form Penta, which provides solutions to help businesses and their stakeholders improve decision-making related to risk and strategy.

Why it matters: ESG standards are evolving, and investors are grappling with an increasing number of reporting requirements. Proper data not only helps capital markets firms ensure ESG agreements and standards are met, but also improves decision-making related to ESG-focused strategies, investments, and partnerships.

What’s next: Expect to see further investment in companies that offer data-driven solutions to make ESG reporting more efficient and transparent. ESG intelligence products may take different forms, but the underlying technology will broadly improve how capital markets firms use data for ESG-related initiatives. For more, explore how AI could transform the ESG space here.

TRADE ANALYTICS AND EXECUTION

Tech to watch: Trade APIs

Why we’re paying attention: Trade application programming interfaces (APIs) provide structured data for use in trading activities to simplify data acquisition, engineering, and management for capital markets firms.

Q3’22 saw 2 early-stage deals and 1 partnership among companies developing trade API technology:

• Thalex is a trading platform for cryptocurrency derivatives. In addition to its online portal, the company’s platform offers traders an API to facilitate trade execution. It raised $7.6M in a Series A deal in July.
• Meanwhile, Tradefeedr’s trade API platform provides traders with access to trade analytics and technology teams with normalized data for model development. The company raised $1M in a seed deal in July.

• In July, Tradier announced a partnership with TradingView — which is used by over 30M investors — to embed its API-enabled trade execution capabilities within TradingView’s charts and dashboards.

Why it matters: Capital markets firms that adopt trade API technologies can streamline trading operations and build more efficient workflows for trade execution, which can ultimately lead to improved trade decision-making based upon data that would otherwise be unavailable or unusable. Trade APIs also improve connections to markets, which can increase the pool of available investment opportunities for capital markets firms.

What’s next: The adoption of trade APIs aligns with a broader shift within financial services toward embedded finance, which uses APIs to embed financial services across third-party platforms. Expect to see further investment in trade API technologies, given the decreased cost of data management and the revenue potential from increased trade opportunities. Watch for more firms, ranging from large investment banks to small trading firms, to adopt these technologies to achieve broader market reach.

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• Alternative investing platforms that open access to non-traditional assets like private equity, real estate, art, and crypto for retail investors and their advisors
• ESG powered by AI that gives retail and institutional investors more complete and accurate assessments of investments’ environmental and social impacts
• Asset tokenization that converts financial or physical assets into digital tokens via blockchain technology, providing the infrastructure for companies and investors to more efficiently issue, track, and trade assets

In this report, we dive into how these 3 technologies are poised to have a transformative impact on both retail and institutional investing and the players that have an edge.

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But the firm is now looking to expand far beyond its traditional business lines, such as investment banking and asset management.

For example, it recently launched a digital consumer bank called Marcus and partnered with Apple to launch a credit card. Goldman is also building an embedded finance offering to allow its financial services — such as digital lending, escrow services, and payments processing — to be integrated with third-party platforms like e-commerce sites via APIs.

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To continue competing in this modern landscape, traditional advisors are turning to technology solutions to streamline and scale manual processes, as well as expand offerings. iCapital Network, for example, provides access to alternative investments through a solution that connects into existing advisory practices. ForwardLane offers an AI-powered platform for investment managers that automates data analytics by organizing unstructured data and deriving actionable insights. 

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Below, take a look at a few highlights from our 141-page, data-driven State of Blockchain Q3’22 Report. For deeper insights and all the private market data, download the full report.

Q3’22 highlights across the blockchain ecosystem include:

• Blockchain venture funding fell to $4.6B, the second quarter-over-quarter (QoQ) decline this year.
• While there were only 6 new blockchain unicorns in Q3’22, they still accounted for a quarter of total unicorn births across all industries. Common themes of the new blockchain unicorns include payments (Paystand and Zebec) and Layer-1 blockchains (5ire and Mysten Labs).
• Nearly half of global blockchain deals went to US companies, the leading region for deals for the 8th consecutive quarter.
• Web3 accounted for over half of total blockchain funding for the third straight quarter, at 63%.
• Blockchain infrastructure & development companies saw a record number of deals at 74, increasing for the fourth straight quarter.
• Funding into institutional crypto & custody fell to $0.4B, the lowest since Q4’20.

Download our Q3’22 State of Blockchain Report to dive into all these trends and more.

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Amid this challenging economic environment, one opportunity for capital markets firms — ranging from large investment banks to small private trading firms — is to invest in new technologies that improve operating models. These solutions can reduce the costs and complexity of application development and data management as well as expand revenue-generating activities by optimizing dealmaking, investing, and trading processes.

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