Disaggregation of a Bank – Startups Raise Nearly $600M in the Last Year

In January, Alexander Pease of Union Square Ventures released a presentation titled ‘Disaggregation of a Bank,’ highlighting a host of internet-enabled Fin Tech startups aiming to disrupt traditional financial services like high net-worth wealth management, lending and merchant banking.

Disaggregation of a Bank – There are lots of cool charts thrown around the startup/VC world. One of the… http://t.co/0qhgQsL5SK

— Alexander Pease (@AlexanderPease) January 7, 2014

Obviously, there are many more tech startups focused on these areas of big banks than Pease highlights, but nevertheless, we thought it would be interesting to use CB Insights data to crunch the numbers behind his original list of 31 bank busting startups.  They provide a snapshot into what is happening within the broader fin tech industry.

Nearly $600M invested in the last 4 quarters

Over the last four quarters, the bank disaggregation startups raised $590M across 21 deals. Of note, startups on the list have raised $469M after Pease published his analysis on January 7. Each of the last four quarters have seen $100M+ invested, with Q2’14 seeing the highest amount driven by large rounds to lending firms Prosper Marketplace and Lending Club.

Deal activity moves to mid-stage

Over the last eight quarters, just over 51% of deal activity to these select startups came at the early-stage (seed/Series A). But YoY deal growth is clearly moving to the mid-stage as highlighted by the visualization below. Among the bank disaggregation startups that have raised mid-stage funding in the last year are Coinbase, Auxmoney, CircleUp and TransferWise, the UK-based money transfer startup rumored to be raising new funds from Sequoia Capital at a valuation near $1B.

Taking on banks requires capital (lots of it)

Among the list of startups, Square has raised the highest amount of capital at over $490M, with its latest $150M raise coming from Singapore’s Sovereign Wealth Fund GIC in October. Six of the startups have raised over $100M including Lending Club, Funding Circle, Stripe and Prosper. Payday loan company Wonga is also among those startups but is reportedly in trouble over its lending practices. Another 7 of the companies have raised over $30M including Dwolla, BitPay and C2FO. All of the startups on the list that have raised over $30M are below:

Top Investors

Perhaps not surprisingly, Union Square Ventures which is where Pease works, was invested in the highest number of companies (9) on the list including Coinbase, SigFig and Funding Circle. A list of VC investors, outside of USV, who have invested in four or more of the bank disaggregation companies since 2009 is below.

Photo Credit: Chris Dlugosz

Want more Fin Tech financing and exit data and analytics? Check out the CB Insights Venture Capital Database. Sign up free below.