As e-commerce accelerates, fintech startups raised record $100M rounds in Q2

But early-stage firms are seeing fewer funding events

Reading headlines here and there, one might assume that venture capital interest in fintech startups is setting records every quarter.

After all: didn’t Robinhood raise $280 million and $320 million more this year? Stripe raised $600 million just a few minutes ago, and wasn’t it Monzo that raised £60 million a few weeks back? Oh, and Hippo raised $150 million the other day.

And what about that huge Plaid exit earlier in the year and Chime’s jillion dollars that came right before 2019 ended?

That’s how it has felt to me, at least. And with good reason: new data from CB Insights indicates that fintech startups raised a record number of so-called “mega-rounds,” financings worth $100 million and more, in the second quarter of 2020.

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So the vibe in fintech that huge rounds have been landing quite often is correct. But underneath the big deals, there was early-stage weakness in the market that makes for a surprising contrast.

The same CB Insights report details a key “tailwind” factor for many fintech startups, namely that e-commerce is booming in the COVID-19 era, rising from about 16% of total U.S. commerce to around 27% through Q2 of this year.

So, let’s start by taking a quick look at Square’s earnings that leaked yesterday, and some notes from Shopify’s recent results to decipher just how fast the economy is heading online before examining what happened in Q2 VC for fintech startups as a cohort.

We’ll keep this as numbers-light as we can, and fun as we can — I promise. Let’s go!

Digital commerce is growing like a weed

You might think that Square, a company most famous for its IRL payment terminals and ability to turn any person into a micro-company would suffer while COVID-19 slowed in-person business. But, despite slowing gross payment volume (GPV), as expected, Square’s revenue exploded in Q2, growing from $1.17 billion in Q2 2019 to $1.92 billion in the most recent period.