Funding in wealthtech hit new highs last year undaunted by the economic turmoil and the major market volatility caused by COVID-19. Instead, global lockdowns led to increased trading volume and tech adoption that ultimately fueled fintech investments to record-setting heights.
Last year, wealthtech funding set a new annual record of $3.7 billion across 157 deals through November, according to a CB Insights report. The increase is a more than 50% spike from the $2.4 billion wealthtech companies had raised during all of 2019.
“During the pandemic, trading volume increased amid market volatility sparking a need for wealthtech solutions to become more seamless, digitally-savvy, and attractive for institutions, retail investors, and the new generation of young investors,” CB Insight’s Intelligence Analyst Anisha Kothapa said. “We expect to see similar M&A activity or partnerships between incumbents and startups this year.”
Industry trends including increased interest in sustainable investing and API integrations will serve as a catalyst for wealthtech funding through 2021, Kothapa said.
Mega-round funding — rounds more than $100 million — is expected to continue in 2021 as millennial-friendly brokerages like Robinhood acquire large customer bases and expand their product offerings to become full-fledged financial services firms, according to Kothapa.
The online trading platform has gained momentum with consumers as the fall out of the pandemic has spurred more young investors to flock to the mobile investing app, likely helping the startup to raise large funding rounds, according to the report.
The uptick in funding last year was largely due to six mega-rounds that took place during the second and third quarters of 2020, which collectively accounted for $1.7 billion — or 46% — of wealthtech funding, according to the report.
These mega-rounds were led by free trading platform Robinhood, which raised $1.26 billion across four rounds in 2020; Trumid, an electronic bond trading platform that raised $200 million in a Series E round in July; and Aspiration, an impact-driven online financial services firm that raised $135 million in a Series C round in May.
During the first quarter of 2020, only one mega-round occurred when alternative asset investment platform iCapital Network raised $146 million.
Robinhood, for one, has already made it clear that its latest cash influx signals a long-term opportunity for the company to evolve into a full-service financial institution for its millennial and Gen-Z clientele.
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