Good Bet: Visualizing Where Smart Money VCs Are Making Fintech Investments

In 2016, there were approximately 836 investments worth $12.7B in financing to venture-backed fintech startups globally. 2016 came in behind 2015, which remains a record year for fintech investments, with 848 investments worth approximately $14.6B.

Though investment pace slowed down in 2016, overall fintech funding was still strong and saw partcipation from top VCs, referred to as “smart money” investors. One way to help separate signal from noise is to follow where historically smart VC money is placing bets.

We used the CB Insights database to visualize where smart money investors made fintech investments from 2015-2016. Some of these areas include insurance, payment technology, and point-of-sale financing. You can find the full list of smart money investor at the end of this brief.

Smart money participation in fintech quarterly financing history

From 2015 to 2016, smart money VCs participated in 187 deals to fintech startups worth approximately $5.97B. Looking at the last eight quarters of deals and financing activity highlights a peak in the first half of each year in both deals and dollars invested, followed by a two-quarter decline.

In Q1’16, smart money participation in fintech deals hit a new peak of 31 deals worth approximately $1.15B. Deals dipped to 19 by Q3’16, but ended the year on an upward trend with 21 deals.

The top deal that included a smart money investor in 2016 went to Oscar Health Insurance. Oscar raised a $400M Series C investment in Q2’16 that included Khosla Ventures, Founders Fund, and General Catalyst Partners. The investment valued the company at $2.7B.

Visualizing smart money fintech investments

We used CB Insights’ Business Social Graph below to visualize how smart money VC investors and the fintech companies in their portfolios are interrelated.

Please click to enlarge – image includes investments from 1/1/15 – 12/31/16.

Key takeaways:

• Clover Health and Affirm had 5 of the 24 smart money investors participate in investments between 2015-2016, the most of any of other fintech startup with VC backing.
• Approximately 30% of deals that included participation from smart money investors were co-investments that included at least 2 smart money investors.
• New Enterprise Associates ranks first for unique fintech investments between 2015-2016, with rounds to nearly 20 fintech companies.
  
• NEA’s top investment was an $80M Series A to healthcare startup Bright Health in Q2’16 that also included Bessemer Venture Partners.
• Khosla Ventures and Index Ventures tied as the second most active investors to unique fintech startups since the start of 2015.
• Khosla Ventures’ top investment was $500M Series C to benefits provider Zenefits that also included participation from Founders Fund and Andreessen Horowitz.
• Index Ventures’ top investment was a $115M Series F investment to billings and payments platform Zuora that also included Benchmark, Greylock Partners, and Redpoint Ventures.

Note: To analyze smart money trends, we looked at the activity of 24 top VC firms, selected according to portfolio valuations and investment outcomes. Some of the investors are linked to relevant research briefs. Here’s our full list of 24 smart money investors:

1. Sequoia Capital
2. Benchmark Capital
3. Accel Partners
4. Greylock Partners
5. Andreessen Horowitz
6. Union Square Ventures
7. First Round Capital
8. Bessemer Venture Partners
9. Kleiner Perkins Caufield & Byers
10. New Enterprise Associates
11. Founders Fund
12. Lightspeed Venture Partners
13. Foundry Group
14. Index Ventures
15. Khosla Ventures
16. Social Capital
17. Emergence Capital Partners
18. True Ventures
19. Floodgate Fund
20. General Catalyst Partners
21. CRV
22. Spark Capital
23. Battery Ventures
24. Redpoint Ventures

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