Where Smart Money VCs Are Placing Bets in Fintech in One Market Map

In 2016, there were 831 investments to VC-backed fintech startups, just shy of 2015′s record 848 investments. Top VC investors in the category participated in 187 deals worth approximately $5.97B from 2015-2016.

Though overall investment pace slowed down in 2016, smart money VCs are still finding new opportunities in the space beyond traditional fintech areas such as personal insurance, payments, and alternative lending. One way to help separate signal from noise is to follow where smart VC investors are placing bets on emerging business models and technologies.

We used the CB Insights database to identify trends among smart money investors and categorized these investments from 2015-2016. Some of these emerging categories include blockchain, point-of-sale credit, and alternatives for institutional investors.

This brief includes:

• Fintech deals by stage
• Early-stage market map
• Market map categories

For more on how we selected our 24 “smart money VCs,” please see the explanation and full smart money list at the bottom of this post.

Fintech deals by stage

Taking a look at deals by stage, early-stage deals (seed/angel and Series A) accounted for 38% of the 187 investments made by smart money VCs into fintech companies between 2015-2016. This trend suggests smart money investors are still finding new opportunities in the category.

Early-stage market map

Diving into these early-stage deals, we identified distinct fintech startups that received seed or Series A funding from a smart money investor between 2015-2016 and categorized them in our market map below.

Click on the map to enlarge. This map is not meant to be exhaustive of companies in the space.

Market map categories

Accounting / Bookkeeping: This category includes startups that offer an alternative or solution to traditional accounting and bookkeeping services. This includes tax accounting, recordkeeping, capitalization table tracking, and expense management. Early-stage startups in this category include Verato, a data scrubbing platform that unifies customer records across disparate financial services databases, and Canopy Tax an online platform to manage and report taxes. Verato raised a $12.5M Series A that included Bessemer Venture Partners and Canopy Tax raised an $8M Series A that included NEA.

Alternative Lending: This is not a new category within fintech but new companies continue to crop up globally. The tech startups in this category include marketplaces for consumer borrowers to connect with willing lenders and online lending platforms that facilitate direct or crowdfunded loans. This includes student loan platform Earnest, which raised a $17M Series A that included First Round Capital and Andreessen Horowitz and mobile lending platform Blispay, which raised a $12.75M seed investment that included NEA.

Bitcoin / Blockchain: Companies like Blockstream and Axoni are developing blockchain technologies to advance the use of digital currency in the financial services industries. Some of the use cases include making payment processing faster and more secure, storing sensitive information, and executing trading. Blockstream raised a $55M Series A that included Khosla Ventures and Axoni raised an $18M Series A that included Andreessen Horowitz.

Hedge Funds / Alternative Data: This is a smaller emerging category within fintech and is made up of companies that are leveraging alternative data, artificial intelligence (AI), and machine learning to make enhanced investment decisions. This includes Numerai, a hedge fund that leverages AI to make investment predictions, and Polychain Capital, a hedge fund that specializes in the trading of blockchain-based assets. Numerai raised a $6M Series A that included First Round Capital and Union Square Ventures and Polychain Capital raised a $10M Series A that included Andreessen Horowitz and Union Square Ventures.

Insurance Tech: Broadly, this category includes companies across peer-to-peer (P2P), life/annuity, healthcare, auto, mobile insurance, and even drones. This includes healthcare provider Bright Health, which raised an $80M Series A that included NEA and Bessemer Venture Partners, and competitor healthcare provider Clover Health, which raised a $13M Series A that included First Round Capital. One unique deal in the category is a $2.7M seed investment made by Social Capital to Verifly, an on-demand drone insurance provider for recreational and commercial flights.

Payment Tech / PoS Credit: This category includes companies developing new credit models that utilize sources of alternative data, alternative financing services, and point-of-sale products and services, including card readers, stands, and digital storefronts. This includes alternative purchase financing platform Bread, which raised a $14.3M Series A that included Bessemer Venture Partners and mobile credit scoring provider Branch International, which raised a $9M Series A that included Andreessen Horowitz.

Personal Finance / Wealth Management: The startups in this category provide services to individuals tracking their personal finances. Even, a personal bookkeeping and expense management platform that lets users create and balance a budget, raised seed VC funding with participation from Khosla Ventures, and Digit, a data analytics software company that analyzes consumer spending relative to income and expense history, raised a $11.3M Series A that included General Catalyst Partners.

Real Estate Investing: This category includes companies that provide investment vehicles in the real estate market. This includes alternatives to a traditional real estate investment fund or investment trust (REIT) such as investment platform Cadre, with an $18.3M Series A that included Founders Fund, Khosla Ventures, and General Catalyst Partners. The category also includes platforms to unlock real estate equity, such as Point Digital Finance, which allows owners to sell fractions of the equity in their home to investors to pay off debts. Point Digital Finance raised a $8.4M Series A that included Andreessen Horowitz.

Company list

Note: To analyze smart money trends, we looked at the activity of 24 top VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:

1. Sequoia Capital
2. Benchmark Capital
3. Accel Partners
4. Greylock Partners
5. Andreessen Horowitz
6. Union Square Ventures
7. First Round Capital
8. Bessemer Venture Partners
9. Kleiner Perkins Caufield & Byers
10. New Enterprise Associates
11. Founders Fund
12. Lightspeed Venture Partners
13. Foundry Group
14. Index Ventures
15. Khosla Ventures
16. Social Capital
17. Emergence Capital Partners
18. True Ventures
19. Floodgate Fund
20. General Catalyst Partners
21. CRV
22. Spark Capital
23. Battery Ventures
24. Redpoint Ventures