The news: Fintech companies raised $10.3 billion in funding last quarter, according to CB Insights’ State of Fintech report—the largest quarterly haul in two years. Fundraising was up 18% on the quarter and up 32% YoY.
We’re so back: No, it’s not 2022, but crypto funding is hot.
- Digital asset companies accounted for 52% of all early-stage deals.
- Three of the top 10 largest deals overall were for crypto companies: Binance, Phantom, and Zenmev.
AI-related deals also continued their rapid ascent, making up 15.7% of all deals. A year ago, AI-related fintech deals made up 9.4% of funding.
That’s where the good news ends: Under the hood, the outlook for fintech funding looks less like the start of a recovery and more like continued malaise.
- Nearly 20% of all Q1 funding came from one deal: Binance’s $2 billion MGX fundraise. Without that deal, funding would have fallen about 4.6% on the quarter and risen just 6.4% on the year.
- The number of deals completed per quarter has fallen every quarter for the past year. Deal volume is down more than 30% YoY.
The share of early-stage deals YTD is sitting at the lowest percent in at least four years. That could indicate that investors are taking a more cautious approach to investing—focusing on known quantities with proven results rather than taking bets on younger startups.
What’s next? It could get worse from here.
President Donald Trump’s tariffs and their feared effects on the economy are already hampering financial activity across the board. Mergers and acquisitions hit a 20-year low in April, per Reuters. That doesn’t bode well for startups seeking an exit—or more funding.
Our take: “Doing more with less” was the oft-repeated refrain when funding crashed in 2022. Fintechs that were expecting a reprieve this year—lower interest rates, more investment, higher business and consumer confidence—may have to keep their belts tighter for longer than they’d planned.