VC funds prioritize financial technology, with 61% increase in investment this year


A study conducted by CB Insights has today revealed that investment activity in financial technology companies from twelve of the world’s most prominent venture capital companies has expanded by an astronomical 61% between 2010 and 2013.

The twelve companies, which include seasoned financial technology start up funding specialists Sequoia Capital and Andreessen Horowitz, have placed an emphasis over the last three years on financial technology firms which began four years ago, a period during which the retail FX industry has been privy to a deluge of companies which have established their operations to the benefit and refinement of the entire industry.

CB Insights’ study asserts that when compared to 2009, last year’s venture capital investment in financial technology companies demonstrates an increase of over 309%. Many companies which have been funded by venture capital companies and have succeeded in bringing highly sophisticated technological solutions to the retail FX industry originate from Israel, a world leading nation in many technological sectors, which is equally applicable to companies in the FX technology segment.

Delving deeper into the data, the biggest VC firms appear to be particularly bullish in four markets, including lending, personal financial management including retail FX, payments technology and Bitcoin, which has recently turned its image around from a high-risk pseudo currency that has volatile price movements and no recourse should an exchange fail, to what is being viewed by many shrewd investors as a viable currency of the future, along with the ingenious technology that it relies upon.

Payments technology companies have been particularly successful during the last few years, as they often employ algorithmic systems which allow online financial services businesses to process payments from all regions worldwide, including China and other nations with a high potential of client acquisition but stringent capital control laws. An example of how successful these companies can be is evident in Safecharge’s recent high value IPO, which raised $126 million for the company after floating on the London Stock Exchange.

Startups which feature investment from multiple investors include Square (backed by Sequoia and Kleiner Perkins), Boku (Benchmark, NEA, A16Z), Stripe (Sequoia, Redpoint, A16Z), Coinbase (A16Z, Union Square Ventures) and Funding Circle (Accel, Union Square Ventures).

CB Insights published that “Financial services institutions increasingly begin to monitor the changing landscape before them, following the smart money is perhaps one of the best ways to understand the trends they should stay ahead of and the companies they may want to watch from a competitive, acquisition, partnership or procurement perspective.”

So fast has been the development and confidence in the technological solutions surrounding financial services that comparing products available in 2009 to those of today is akin to comparing a stone abacus with a supercomputer.

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VC funds prioritize financial technology, with 61% increase in investment this year

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