Funding is on everybody`s mind, especially for early-stage companies with no significant customer base. Will this time be different than in other market downturns?
Crowdfunding limits in the US are increased
The SEC increased the amount that companies can raise through crowdfunding. SEC is has proposing to increase the limit from $1million to $5million for accredited investors and to revise the calculation of investment limits for non-accredited investors (allowing them to allocate a greater percentage of their net worth). Of course, it will take time to be able to tell the impact. When will the appetite kick in at the current lower valuations.
Rosenblatt Securities research from last Fall, shows the expected impact on Fintech valuations at various stages affecting heavily the unicorns. For earlier stage startups the average expected impact is expected to be around 20% (1/3 of the unicorn impact).
B2B Fintech offerings, mostly Saas, are the ones that are getting traction from the new Fintech funds are raised now. Over 50% of investors claimed (before the crisis) that they would be opportunistic in their approach especially in sectors whose valuations were overblown.
New funds looking for great Fintech deals
New VC funds with an exclusive or partial Fintech focus are being raised as we speak but shyly of course.
FIS one of the leading financial vendor providers, is salivating on the opportunities that can be found in these market conditions and launched in late April a new $150million fintech fund. They already made their first investment in Flutterwave, the Nigerian payments fintech who raised $35mil Series B. FIS was familiar with Flutterwave as they had a business partnership established in January.
What is noteworthy is the interest in Nigeria and Africa in general. The SEC has also allowed Nigerian enterprises of all sizes that are more than 2yrs old to access the US crowdfunding portals.
#Nigerian Micro, Small & Medium Enterprises (MSMEs) over 2yrs old can access US #crowdfunding markets. #CrowdFunding: Who is qualified according to new #SEC Guidelines – https://t.co/GXmiRHxPh4#funding @matteorizzi @Karunk @DrEmuwa @CTPInclusion @NicoleAnMo @psb_dc
— Efi Pylarinou #Insider (@efipm) May 18, 2020
FINTOP Capital closed its second Fintech FINTOP Fund II which was oversubscribed and raised $126 million. The first fund was raised in 2016 ($50million) and brags for two exits: DealCloud sold to Intapp in 2018 (both in the institutional Saas sector of capital markets), and Solovis (a cloud-based multi-asset class portfolio management, analytics and reporting technology platform, for institutional investors) which was sold to Nasdaq this March of this year. This second fund already has holdings in Trovata (automating cash mgt), Vouchr (mobile UX in payments), myDigitalOffice (digital back office hospitality solutions), FinMkt (consumer financing), Decusoft (Saas compensation mgt).
RTP Global announced a fund to invest into early-stage technology companies in FinTech and Software-as-a-Service (SaaS). The new fund is $650 million. Its previous fund was $200million (raised in 2017). See more here.
Angels slowdown and startup job marketplaces are one-sided
AngelList a platform that has innovated in the angel investing space through its syndicates and recently announced layoffs without sharing specific details.
It is already 10yrs old and has roughly $1.8 billion assets under management and several funds. Five years ago it also launched a job business with an app. Right now it lists over 130k tech jobs for 100k companies. Fintechs like Stripe and Affirm have been part of the AngelList job talent ecosystem. Of course, now it will be a one-sided market similar to the challenges faced in the lending market, where demand for loans far exceeds supply.
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