The news: Fintechs raised $36.8 billion across 1,209 deals. The total funding for 2021 already exceeds all funding raised during the entirety of 2020, per CB Insights.
Here’s what drove funding activity in Q2: Fintechs dominated global startup funding in all sectors: One dollar out of every $5 raised in Q2 went to a fintech.
Can the momentum be sustained? For the rest of this year at least, yes. Fintech-focused funds have a lot more money to dish out in the hope of more lucrative exits.
Andreessen Horowitz raised $2.2 billion for its third crypto fund in June. This month, Index Ventures raised $2.9 billion that will in part invest in fintechs, and Ethos Invest announced a fund aimed to reach £1 billion ($1.28).
The proliferation of funds is due to investors’ view that fintech startups have significant potential to rapidly appreciate in value: Fintech unicorns now account for close to one in five of the world’s unicorns. And when they eventually go public, their private backers could get sky-high returns. Andreessen’s stake in Coinbase was worth $11.2 billion when the exchange went public in April—more than half the amount of capital the VC raised from investors in its 12 years of operation.
With a record number of fintech exits already having occurred this year, many private investors who made a pretty penny from them are now reinvesting their earnings in the next winners—even as new funds also rush to get in on the action.