For many in the fintech industry, there are few things as scary as the economy right now. High inflation, lowered investor and consumer confidence, and political tensions are all contributing to an uncertain future.
One of the largest impacts of this pullback in the fintech industry is seen in the drop in venture capital funding, the lifeblood of privately held companies. The lack of funding is giving startups of all sizes a shorter cash runway, which is leading to employee downsizing and increased exit activity.
We turned to CB Insights, which recently dropped its Q3 2022 State of Venture report, for some statistics that help tell the story of today’s funding environment in fintech and beyond. Here are some of the high-level takeaways:
71% drop in new unicorns in the third quarter of this year
Across the globe, there were only 25 newly minted unicorns in the third quarter of 2022. This is the lowest count since the first quarter of 2020, when the pandemic first began. It is worth noting that 14 of the 25 new unicorns are U.S. based. The total number of unicorns across the globe is now 1,192.
38% drop in fintech funding QoQ
Looking at the fintech sector specifically, fintech funding across the globe dropped to $12.9 billion. This dip– a 38% drop– marks the lowest quarterly funding amount in nine quarters. The last time fintech funding was this low was in the second quarter of 2020, when fintech funding totaled $12.2 billion.
42% drop in median deal size for late-stage rounds this year
So far in 2022, the median size of late-stage deals has totaled $29 million. This represents a 42% drop from last year’s total of $50 million. This year’s median late-stage deal size is similar to the median size of mid-stage deals, which totals $30 million. Interestingly, this median mid-stage deal size is on-par with the median mid-stage deal size of 2021, which also totaled $30 million.
56% fewer investments from top 3 investors
According to CB Insights, last quarter’s top three investors are quieter this quarter. Tiger Global Management, Gaingels, and SOSV made 109 investments this quarter. This figure is 56% lower than the number the investors made in the second quarter of this year. Notably, Tiger Global Management, which has been the number one investor in the past three quarters, did not even rank among the top 10 investors this quarter.
A bright light
Things are not all gloom and doom this Halloween. Looking at the bright side, while fintech funding is dropping, it is still above pre-pandemic levels.
As an example, in the first quarter of 2020, before the pandemic truly exploded, quarterly fintech funding totaled $11.3 billion. That’s $1 billion lower than today’s level. Going back even further, in the first quarter of 2018, quarterly fintech funding totaled $9.6 billion.
So perhaps it’s best to look at these drops as a market reset, instead of as the fintech world coming to an end.