Venture Capital Remains a Bright Spot in 2020 Despite a Once in A Generation Pandemic
Despite a 10-percent dip in global, year-over-year venture funding through Q3 of 2020, some VC sectors have defied the pandemic economy and managed to thrive, capturing $205.4 billion in aggregate VC funding, according to Crunchbase.
Perhaps the biggest winner in the year has been B2B financial technology. In North America and Europe alone, VC industry tracker Pitchbook says B2B fintech has roughly $11 billion of some $30.4 billion in global fintech funding year-to-date, according to aggregated figures from CB Insights.
“The crisis has upended the world in which banks operate in terms of customer behavior, ways of working, and government actions,” wrote McKinsey in a May report. Specifically, the pandemic has accelerated the need for innovation related to credit-risk analytics for small-and-medium-sized businesses (SMBs), savings and investment products for retirees, emerging banking-as-a-service (BaaS) solutions for enterprises and regulatory technology (regtech).
Highlighting the market’s growing appetite for regtech is the recent acquisition of Information Venture Partners’ portfolio company Verafin last month. Just before Thanksgiving in the U.S., stock exchange operator NASDAQ announced its pending acquisition of Verafin for $2.75 billion in an all-cash deal.
The acquisition will combine Verafin’s comprehensive suite of anti-financial crime management products with Nasdaq’s reach and established regulatory technology leadership to create a global SaaS leader in the fight against financial crime.
As for the broader B2B fintech sector, however, many firms are grappling with increasingly challenging selling environments marked by Zoom-conference-only customer prospecting, devoid of the human touch. They are also encountering tighter budgets from FIs, as many large organizations are now conducting more detailed ROI analyses prior to purchase.
Still, elite solutions are still finding ways to overcome prospects’ crisis-strained budgets. Specifically, McKinsey says fintech’s that help FIs “rapidly digitize, automate, and reduce their costs are the most likely to continue to get attention and win sales.” Information Venture Partners’ 2020 deal flow happens to align with McKinsey’s market insight.
Information VP Deal Flow
Verafin may have been Information Venture Partners’ ‘trophy’ exit, but it’s not our only success story this year. In July, French customer-experience management firm Quadient acquired Information VP portfolio company YayPay, an automated accounts receivable automation vendor.
Another Information VP portfolio company, enterprise data-privacy management solution BigID, achieved unicorn status with $70 million raised in a Series D at a $1B+ valuation. The round was led by Salesforce Ventures and Tiger Global Management, with participation from Glynn Capital and existing investors Bessemer Venture Partners. This news comes just months after BigID scored $50 million in a round led by Tiger Global.
And in June, Information VP’s very own Thoughtexchange, an enterprise idea crowdsourcing tool for executives seeking insight from peers and other experts, also secured a $10 million funding extension on its December Series B raise. Noting explosive user growth, Information Venture Partners led the extension after leading original Series B in November as well.
Meanwhile, Information VP portfolio company Sensibill, an enterprise receipt management tool, announced a flagship partnership with JP Morgan Chase in June, enabling the bank’s customers to “manage home office expenses, submit proof of purchase for insurance claims, track their spending at a granular level,” and more, according to the press release.
Information VP also led an $8.3 million funding round for next gen financial-planning-and-analysis software provider Jirav in July. We also funded data collaboration and networking solution Cinchy, leading a $10 million Series A in May.
Putting People First
To further capitalize on the rise of the B2B fintech sector, Information VP also made some upgrades to its team. The firm made three strategic hires in October, adding valuable expertise to our executive and associate ranks.
These hires include Sara Defina, our new director of finance, Peter Carrescia, a venture partner, who will work directly with our portfolio companies’ senior leadership teams, and new associate Hasan Basrai, who has been tapped to join Information VP’s investment team.
Funding the Future
As the VC industry restructures itself in the aftermath of the virus, institutional mission objectives have changed seemingly overnight. To this end, environmental, social and corporate governance (ESG) mandates are assuming increasingly greater importance for private investors.
Key issues for modern GPs include ways to address the climate crisis and resolve systemic inequities via diversity and inclusion initiatives.
Looking out into the future, we remain very excited about our core investment thesis areas. The B2B fintech sector is poised to outperform as struggling SMBs seek out more personalized and digitally agile solutions to help them maximize efficiency and control operating costs. In this environment, embedded finance solutions that involve cash management and other BaaS offerings should do well.
Enterprise SaaS is also positioned to outperform in the near-term, given the lasting impact of remote-work dislocations. With the enterprise becoming increasingly virtual, Information Venture Partners believes that digital employee collaboration tools, customer-engagement solutions and new videoconferencing applications will capture investor interest.
In the wake of the SolarWinds hack, however, and the unprecedented disruption it has created within enterprise, digital supply chains, the cybersecurity sector is primed to be a critical investment target this year. Financial-sector-focused antifraud tools will also be in high demand. With 2021 ransomware costs projected to hit $20 billion globally and card-not-present (CNP) fraud losses slated to hit $130 billion by 2024, on a trailing five-year curve, cybercrime has become a pandemic in and of itself.
After a testing year filled with anxiety and uncertainty, the expedited COVID vaccine rollout, a historic feat of modern science, should give us all great hope for 2021. To our portfolio teams and extended professional networks, Information Venture Partners wishes you all a very happy holiday season and great success in the new year.