The sheer volume of news, product launches, investments and reports makes it difficult to keep perspective over the fast-moving financial tech market. In today’s newsletter we’re focusing on investment, taking a look at three of the most interesting deals taking place this week and examining what they tell us about the state of the wider industry.
1. Santander Innoventures makes first robo-advisory investment
Spanish bank Santander continues to invest in fintech startups through its active Innoventures corporate investment arm. Its latest investment, in SigFig, is also its first investment in the highly-touted (though some believe misleadingly named) robo-advisory segment. Based in San Francisco, SigFig aims to democratise wealth management by deploying technology, data science and design to offer high end investment advice to all levels of wealth.
Santander isn’t the only big bank investing in this USD40m deal with UBS also participating in the round, alongside financial institutions and insurers Comerica, New York Life and Eaton Vance. Bain Capital Ventures, DCM, Nyca Partners, and Union Square Capital Ventures also invested.
“The ongoing need for affordable, accessible financial advice continues to be an area of focus for the investment industry, says Mariano Belinky, managing partner at Santander InnoVentures. “We share a common vision with Mike Sha and the SigFig team, one that extends beyond traditional wealth management, to embracing the challenge of bringing an understanding of financial well-being to every individual. We hope to be able to now collaborate with the aim of ultimately bringing their platform to serve Santander’s 122m customers.”
2. Online lending in Mexico
Another interesting deal this week is Konfio, which picked up $8m to help open up access to lending for the underserved small business segment. The deal comes hot on the heels of Kueski, which picked up $35m equity and debt financing for its real-time consumer micro-loans business in what was plugged as the biggest capital raise for a fintech startup to date. Until now the US, UK and China have dominated the story in online lending – is the same wave now gaining momentum in South America?
"The fintech sector is one of the great opportunities for the development of the digital economy both in Latin America and the world. The financially neglected market in Mexico alone has an estimated value of ten billion dollars. We are very interested in harnessing the potential of this industry. Konfío is our first investment in Mexico, and we are very pleased to be part of their development," says Bill Cilluffo, partner at QED Investors, which invested in the round.
Backing comes from Accion Frontier Inclusion Fund, a fintech fund managed by Quona Capital that was specifically set up to back companies banking the unbanked. QED Investors, Kaszek Ventures and Jaguar Ventures also participated. The firm lends up to 150,000 pesos and says that more than 200,000 businesses in Mexico approached Konfio for a loan in the first two years it was active.
"There is a great need for financing for small businesses,” says said David Arana, founder and CEO of Konfio. This sector represents 95 percent of businesses in Mexico and is the backbone of the national economy, but it has not been a priority for large financial institutions. This new round of funding is a validation of our business model and allows us to integrate partners who contribute not only capital, but also extensive knowledge, experience, and mentoring to grow and continue improving our products and customer experience,"
3. London fintech darling scoops $26m
UK fintech darling Transferwise announced a $26m new raise this week, in a deal that takes its total funding to USD117m and reportedly nails its valuation north of USD1bn. The round is significantly smaller than the $58bn it picked up at the beginning of last year, but the firm says funding “isn’t always a necessity” and it wanted to give existing backer Baillie Gifford the opportunity to invest more in the business. The company has never flaunted its valuation as a benchmark of success and has instead focused on user milestones.
Founded in 2001, the firm says it now has 1m customers and offers 600 currency routes (for example UK to Germany), with 150 more expected this year. This year it has added routes to China and South Korea, with Brazil, Japan and Hong Kong next on the agenda. CEO Taavet Hinrikus says the company’s users are currently sending £500m ($734m) each month and the company now employs 600 people across the UK, Europe and the US.
“TransferWise was incredibly well funded to execute its business plan already, funding is not always about necessity,” a company spokesperson tells bobsguide. “Baillie Gifford were keen to invest and we wanted to give them the opportunity. The extra money will help us continue our global expansion plans and grow even faster.”