Venture capital funding of U.S. FinTechs almost doubled in both transaction value and volume, according to an analysis released Thursday (Feb. 10) by S&P Global Market Intelligence.
The company says the jump in transaction value was especially surprising but cautions that 2022 could be a different story.
“U.S. FinTech funding had a banner year in 2021, but it will be a tough act to follow,” the report says. “Sagging valuations in the public equity market and potential interest rate hikes do not bode well for future investing activity.
“Private capital remained plentiful in January 2022, based on the aggregate total for all U.S. industries, but we will be watching for signs of a slowdown. The aggregate value of venture capital funding to U.S. financial technology companies soared in 2021, led by startups focused on investment and capital markets technology,” according to the report.
Among the key findings in the S&P Global Market Intelligence report:
- The strong increase in FinTech funding in 2021 was not due just to favorable year-over-year comparisons coming off a slowdown in activity in 2020 because of the COVID-19 pandemic. The aggregate amount raised increased by more than 95% in the fourth quarter of 2021 compared to 2020, and the volume of transactions jumped over 40% in that time.
- Investment and capital markets technology companies were the biggest beneficiaries of the increase in VC investment in 2021, at about $9 billion, according to S&P estimates, not including Robinhood Markets Inc.’s $3.4 billion capital infusion in February 2021.
- Investment and capital markets tech firms had almost 250 funding rounds in 2021, about 33% more than the second-highest category, according to the report. They accounted for 26% of the total FinTech fundraising rounds during the year.
- There are some troubling signs ahead for FinTech in 2022, but it’s still early in the year and that could change.
Related: British FinTechs Felt the Love in 2021 with $37.3B in Funding
Meanwhile, a biannual report from KPMG shows that British FinTechs were backed with $37.3 billion in funding in 2021, up 617% over 2020.