Toward the start of 2018, analysts began to highlight the potential for venture capital (VC) to embrace the B2B business model. American Banker reported last December that Silicon Valley Bank Head of Payments Strategy and Solutions Reetika Grewal predicted B2B payments to be one of the top targets for FinTech investors, while other focuses with B2B applicability — including blockchain, artificial intelligence (AI) and RegTech — would also be popular with VCs in the coming year.
The latest analysis from Accenture finds new evidence that investors have been acting on their B2B interest for some time.
A report released this week found startups across the U.S., U.K. and India drove a surge in FinTech venture capital funding in 2017, and Accenture Financial Services Senior Managing Director Julian Skan pointed to the B2B business model as a significant presence in this trend.
“Much of the growth, particularly in the U.S. and U.K., has been driven by new investment flows from China, Russia, the Middle East and other emerging economies,” Skan stated. “In addition, we saw more and more B2B FinTech models proving out at the banks, coupled with larger and later-stage investments as the FinTech world scales up.”
Total venture capital across the global FinTech market between 2010 and 2017 hit a combined $97.7 billion, growing at a compound annual growth rate (CAGR) of 47 percent.
“This volume of investment reflects the soaring demand within financial services for new digital innovations as these technologies prove their value and applicability in the market,” said Accenture Financial Services Group Chief Executive Richard Lumb in another statement. “That will continue to position FinTechs for a vital role in helping reshape the financial services landscape. For markets like the U.K., where slower economic growth and industry uncertainties due to Brexit have been an issue, it is an encouraging sign.”
This week, a breakdown of B2B venture capital funding rounds offers support that the growing interest in the B2B business model continues into 2018. There’s another trend identified by Accenture, however, that is even more acutely represented in the B2B VC breakdown.
Alternative Lending
Accenture highlighted Kabbage, the U.S. alternative small business lending firm, that secured $900 million in 2017, while other alternative finance players, like LendingPoint and SoFi, landed significant investment rounds.
This week, alternative lender C2FO showed that the alternative finance funding gears are still turning, landing $100 million from Allianz X and Mubadala Investment Company. Existing backers Temasek, Union Square Ventures and Mithril Capital also participated, an announcement said.
C2Fo said it would use the funding for secondary share purchases, international growth, product expansion and customer acquisition. The company operates a working capital and trade finance solution for companies to secure financing to power global trade.
“C2FO’s business model of connecting companies with working capital in real time is a unique solution to a critical aspect of trade financing,” said Allianz X CEO Dr. Nazim Cetin in a statement.
Blockchain
The future of FinTech cannot be discussed without including blockchain in the conversation. This week’s blockchain investment comes from Square Peg Capital, which provided $5.5 million in Series A funding to AgriDigital, an Australian company hoping to use the funds to expand into North America.
Reports in The Australian Financial Review this week said the company uses blockchain to facilitate supply chain finance to the agriculture business, offering supply chain management features also powered by distributed ledger technology.
“The opportunity for a distributed ledger supply chain with multiple participants lends itself extraordinarily well to distributed ledger technology, but also any form of material improvement,” said Square Peg Capital partner Tony Holt.
RegTech
The RegTech industry was another area highlighted by Silicon Valley Bank’s Grewal. This week, ZenBusiness secured $4.5 million in funding, reports in TechCrunch said. The company offers small businesses an easier way to navigate “red tape” and maintain regulatory compliance. The Austin, Texas-based company charges a monthly fee to automatically provide small businesses with annual reports and forms needed to file taxes and other legal documents within the state. The seed funding round was led by Lerer Hippeau, reports said. Greycroft, Slow Ventures, Revolution’s Rise of the Rest Seed Fund and Founders Fund also participated, as did other angel backers.
T&E
Complai
A $1.4 million seed round for Complai will help the company expand its small business expense management solution Shep, a tool CEO Daniel Senyard recently told PYMNTS can help address the 70 percent of U.S. businesses’ travel spend that goes unmanaged. The company secured the investment from Moonshots Capital and the Capital Factory. The funding will go toward Complai’s official launch of the Shep solution, as well as toward customer onboarding, product development and team growth.
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