This One Area Of Fintech Investing Is Still Red Hot
By Ian Kar
Across the board, almost every stat in venture capital is down between 2021 and 2022. It’s sorta depressing to see. But interestingly, there was one major data point that reached record highs in 2022: the percentage of early stage deals that corporate venture firms are in participating in within fintech went up from 55% in 2021 to 69% in 2022, according to a new CBInsights report.
CVC, as its also known, is when institutions or companies write checks into a startups round. And in fintech, CVC’s are usually banks, late stage startups, or well financed fintech or crypto companies. The fact that they were more active in 2022 isn’t shocking—the fact that they’re predominately investing in early stage startups is a huge change.
Overall, corporate venture capital has been one of the lone shining spots within fintech investing. While funding fell 48%, similar to other sectors, the number of deals fell very slightly. That means that there’s still the same interest in deals, just the check sizes are getting smaller.
CVC has always been a big area of fintech growth—take a look at this chart breaking down the fintech CVC investing volume over quarters. Q4 2023 was one of the worst performing quarters in 5 years, and 2022 still was largely positive for fintech CVC. Circle Ventures and Citi Ventures were the most active CVC’s last quarter, according to CBInsights, with 7 each.
For startups, this means that corporate VC interest in early stage deals probably isn’t waning soon; if you’re looking to raise, it may make sense to reach out to a bank or corporate innovation group to fundraise. While VC’s and funds are finding it difficult to fundraise, a lot of CVC’s led by banks and financial institutions have much easier access to capital—the bank they work for. Based on what I’ve seen historically deals with CVC’s take long, but that timeframe is getting shorter too. The tricky thing is aligning expectations: are they going to roll your product out internally or are they just writing a check? Be sure to lock that down early, otherwise one or both sides will end up disappointed.
There might be a lot of benefits to raise from corporate VC’s—not only are they deploying more, but the strategic and signaling benefits may make it an even more attractive opportunity.