Wealthtech funding hits record $5.6 billion in Q1

Wealthtech companies raised a record $5.6 billion during the first three months of 2021, exceeding the total raised in all of 2020, according to CB Insights’ latest State of Wealth Tech report.

A total of 86 wealthtech deals took place during the first quarter, the highest level of deal activity in a single quarter for the sector. The influx of funding was fueled by the retail investing boom that occurred in the aftermath of the pandemic, and highlighted key trends like an increase in mega-rounds, merger and acquisition activity, and public offerings, according to the study.

Nine wealthtechs raised more than $100 million in mega-rounds that drove the majority of the funding during the first quarter. Robinhood had two of the top funding rounds, bringing in a total of $3.4 billion, which made up more than 60% of all wealthtech funding during the quarter.

Robo-advisers also experienced more funding activity, with year-to-date funding sitting at $254 million across eight deals, according to the report. Stash was a leader in the funding rounds, with a $125 million mega-round in February that pushed its total funding to $439 million. Stash has grown to more than 5 million users and now has $2.5 billion in assets under management.

M1 Finance also gained notable funding with a $75 million round in March. M1’s total funding now sits at $178 million, according to the report. M1 Finance has more than $3.5 billion in AUM and 500,000 funded accounts.

Robo-advisers’ focus on cryptocurrency offerings could also increase future funding, according to the report. For example, the industry’s first crypto robo-adviser, Makara, was introduced in April, and Wealthfront announced earlier this month that it is exploring options to offer the more than 440,000 investors on its platform direct exposure to cryptocurrencies like Bitcoin and Ethereum.

Wealthtech M&A activity and IPOs are also on the rise, as companies like SoFi, MoneyLion and Coinbase have all gone public or announced plans to do so.

Coinbase, the largest U.S. cryptocurrency exchange, listed on the Nasdaq Global Select Market via a direct public offering April 14. Its exit valuation clocked in at $65.3 billion. Meanwhile, eToro, SoFi and MoneyLion all announced they were going public via special purpose acquisition companies.

Wealth management software funding during the first quarter totaled $712 million across 23 deals, putting it on a pace to set a new annual record, according to CB Insights.

Wealthtechs have been busy with merger and acquisition activity in 2021, too, and it’s not even midyear. AssetMark Financial Holdings Inc. announced its $145 million purchase of financial planning software Voyant, SEI acquired defunct Oranj’s technology platform and Orion Advisor Solutions announced its deal for risk management fintech HiddenLevers.

Betterment acquired the U.S. arm of Wealthsimple, while MoneyLion bought Wealth Technologies to ramp up its financial planning software.

Envestnet, too, announced the acquisition of fintech Harvest Savings & Wealth Technologies to further build out its digital financial wellness ecosystem by merging customers’ wealth and savings accounts.