Welcome to The Interchange! If you received this in your inbox, thank you for signing up and for your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there, and it’s my job to stay on top of it and make sense of it so you can stay in the know.
Known venture firms Sequoia Capital and Andreessen Horowitz (a16z) invested more in fintech than any other category in 2022, according to research from CB Insights. I’m not going to lie—upon learning this, my fintech-loving ears perked up. Sequoia apparently was fairly active overall last year despite the global downturn, with over 100 investments. And fintech represented nearly a quarter of the firm’s deals.
We saw a similar trend at A16Z. According to CB Insights, of the 206 deals that 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 the first half of 2022, with the remainder closing in the second half of the year. Sequoia-backed 25 companies in the financial services space last year. Its top three fintech targets, as identified by CB Insights, were capital markets, payments, and payroll and benefits, with each category representing 16% of its investments.
A16z backed 49 companies in the fintech space last year, and its top three fintech targets were payments (28%), blockchain (22%), and digital lending (12%).
Three out of Sequoia’s four deals in the capital markets space were follow-on investments, a reflection of the firm’s “faith in the future of capital markets tech,” noted CB Insights. Deals it participated in included Citadel Securities’ $1.2 billion round; Capitolis’ $110 million Series D; Watershed’s $70 million Series B; and Ledgy’s $22 million Series B.
More than a quarter (28%) of a16z’s fintech investments in 2022 went to the payments category. For example, it participated in SpotOn’s $300 million Series F; Jeeves’ $180 million Series C; and Tally Technologies’ $80 million Series C. Meanwhile, Sequoia’s investments in payment tech companies spanned both consumer and business payments and operated in four distinct markets: buy now, pay later (BNPL), expense management, peer-to-peer (P2P) payments, and online payment acceptance. Two of the four deals are at the seed stage. Specifically, Sequoia participated in Klarna’s $800 million financing; Yokoyo’s $80 million Series B; Telda’s $20 million seed round; and Cococart’s $4 million seed financing.
While blockchain and crypto arguably fall under the fintech category, I usually leave the analysis of the payroll and benefits were Sequoia’s third most popular category, with the firm backing four such companies — all at later stages — and participating in CaptivateIQ’s $100 million Series C, Rippling’s $250 million Series D, Remote’s $300 million Series C, and Truework’s $50 million Series C. We now know that investments in fintech firms were significantly lower in 2022 than they were in 2021. But wasn’t that the case in every industry? The continued investments in the space by Sequoia and a16z are just one sign that fintech is not dead.
Sequoia’s third most popular category was payroll and benefits, with the firm having backed four such companies — all at later stages — and participating in CaptivateIQ’s $100 million Series C, Rippling’s $250 million Series D, Remote’s $300 million Series C, and Truework’s $50 million Series C. We now know that investments in fintech companies were significantly lower in 2022 compared to 2021. But wasn’t that true for every industry? Sequoia and a16z’s continued investments in the space are just one sign that fintech is down but not out.