In Q2 2024, the global enterprise fintech secured a total of $4.6 billion in venture capital (VC) funding across 315 deals, an increase of 27.1% year-over-year and growth of 2.2% quarter over quarter, breaking the market’s downward trend. previous two quarters, data from PitchBook to show.
This increase is due to larger transactions. In the first half of 2024, enterprise fintech companies reported a median VC deal size of US$5 million, up 11.3% from the median of US$4.5 million In particular, late-stage deals saw a 20.1% increase in median deal size, reaching US$9.9 million.
However, other stages declined from their 2023 median, with pre-seed and seed down 22.8% to US$2.2 million, with early-stage venture capital falling by 6 .2% to US$5 million and VC growth decreasing by 31.5% to US$17 million.
In the second quarter of 2024, capital markets and CFOs dominated venture capital financing activity. Capital market startups closed 35 deals, securing a total of $1.6 billion, or 34.8% of all corporate fintech deals during the period. The vertical saw some of the largest enterprise fintech funding rounds of the quarter, including Clear Street’s US$685 million Series B, AlphaSense’s $650 million acquisition financing to buy competing company Tegus, and Finbourne’s $70 million Series B.
CFO Stack tracked the capital markets, securing the second highest deal value in Q2 2024 at US$1.2 billion (26%) across 76 deals. Notable deals included Capital’s $165 million series B, Ramp’s $150 million Series D2And FloQast’s $100M Series E.
Corporate fintech exits and mergers and acquisitions
Despite some rebound in venture capital funding, exits and mergers and acquisitions (M&A) in the enterprise fintech sector remained subdued, with just $1 billion in exit value recorded for 33 deals in the second quarter 2024.
Notable acquisitions during the quarter included AlphaSense Acquisition of Tegus for US$930 millionAurionpro Solutions’ acquisition of a majority stake in Arya.ai for $16.5 million, Acquisition of Basis by Digitsstripe acquisition of SumatraPaystand’s acquisition of Teampayand switch the AI acquisition of Atom Finance.
Notable transactions have also taken place for public companies, such as Nuvei’s all-cash privatization deal by private equity (PE) firm Advent International, Shift4 acquires majority stake in point-of-sale (POS) payment company Vectron SystemsAnd Global Payments acquires UK-based payment services provider Takepayments.
Only one initial public offering (IPO) took place in the second quarter of 2024. It involved Trust financial technologiesa banking technology provider, listed on the National Stock Exchange of India and having recorded an exit value of US$ 21.3 million.
BaaS, AI, and Crypto Payments as Leading Enterprise Fintech Verticals
The PitchBook report also highlights some of the key trends driving enterprise fintech in Q2 2024. First, banking as a service (BaaS) continued to make headlines during the quarter amid increased regulatory scrutiny following the collapse of BaaS platform Synapse.
Synapse filed for Chapter 11 bankruptcy in April 2024 after a combination of internal mismanagement, failed partnerships and broader market challenges led to the company’s downfall. The collapse affected nearly 100 fintech companies and millions of customers, TechCrunch reportedleaving around $160 million in deposits inaccessible and raising concerns about the stability of the BaaS model and the fintech industry’s heavy reliance on a few service providers.
Despite these setbacks, fintech companies continued to explore BaaS in Q2 2024: FIS spear in May its BaaS platform, Atelio; Equals Money, payment solutions provider, introduced in June a new BaaS product; Atmos Financial extended its relationship with banking partner Five Star Bank in June to explore BaaS opportunities; and Velmie announcement in May, a partnership with Unlimit to bring together Velmie’s platform with Unlimit’s cutting-edge BaaS offering.
Artificial intelligence (AI) is another major trend outlined by PitchBook, with fintech leaders and banks continuing to explore generative AI (genAI) applications in the second quarter of 2024. In May, Visa introduced its new Visa Account Attack Intelligence (VAAI) tool, which uses genAI to detect and prevent enumeration attacks in card-not-present transactions. The same month, JP Morgan revealed its IndexGPT tool, which offers an automated approach to the selection of thematic investment baskets.
Finally, crypto payments gained traction in the second quarter of 2024 as major payment players adopted blockchain solutions. In April, Stripe announcement it would start supporting global stablecoin payments using Circle’s USDC. The same month, Block, the company behind Square, Cash App and other services, announced a new program allowing merchants using Square’s solutions to convert a percentage of their daily sales into bitcoin, TechCrunch reported. The company also revealed plans to expand its bitcoin mining ambitions from chip design to developing a complete bitcoin mining system.
In the second quarter of 2024, enterprise fintech startups continued to capture the majority share of venture capital deal value in the fintech sector, accounting for 51.9% of total venture capital, according to PitchBook.
Featured image credit: edited from free pik