Here's How Smart Money VCs Are Placing Their Bets On The Payments Industry

Stripe is just one of three payments startups that has received financing from a smart money VC in 5 separate rounds.

VC funding to payments companies passed $2B for the first time last year, more than double the amount the previous year. With investing in payments startups becoming increasingly crowded, it’s useful to know where top VCs are putting their money.

Top VC Spending In Payments Is Soaring

Deal activity per year in payments for the top 20 smart money VCs has remained relatively stable. The dollars, however, are soaring: In Q1’15 alone, smart-money VCs participated in deals to payments startups worth $375M. Notable deals in Q2’15 included Affirm’s $275M Series B round, in which three smart money investors participated: Spark Capital, Khosla Ventures, and Andreessen Horowitiz. Another prominent deal was Zuora’s $115M Series F round in Q1’15, which included Benchmark Capital, Index Ventures, and Greylock Partners.

(For more on how we selected our top 20 VCs, see the note at the end of this post.)

Key Areas In Payments For Smart Money VCs

One useful way to visualize smart money strategies is to use CB Insights’ Business Social Graph, which shows how key investors and target companies are related. The most active smart money players in payments are Accel Partners, Andreesen Horowitz, and Index Ventures. Other smart money VCs, including CRV and Bessemer Venture Partners, were much less active. Startups that were especially popular among the top VCs included peerTransfer, Stripe, and PayNearMe, all of which received financing from smart money VCs in 5 separate rounds.

Within payments, top VCs are putting bets on startups that specialize in three different types of services:

Point-of-Sale Solutions: Companies like Square, iZettle, and Adyen create tools that allow businesses to streamline purchasing at the point-of-sale. Products they offer include specialized credit-card readers, countertop stands and terminals, mobile-payment technology to speed up in-store payments, and software to track and follow up on sales.
E-Commerce Payments Solutions: Companies like Stripe, WePay, Braintree (now owned by PayPal), and Affirm offer businesses secure, fast, and cheap ways to accept payments online and on mobile. Their main products are their APIs (application programming interfaces), and they usually charge a per transaction percentage and fees. Often, individual companies will offer additional services. For example, while Affirm offers an online payments API, it also offers financing options for B2B customers.
Personal Finance Solutions: Companies like WorldRemit, MobiKwik, and TransferWise give consumers more convenient and secure ways to manage money, send money abroad, or use mobile wallets.

Note: To analyze smart money trends, we looked at the activity of the top 20 VC firms, selected according to portfolio valuations and CB Insights’ Investor Mosaic investor ranking model. Here’s our full list of 20 smart money investors:

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