Private equity and venture capital firms that make technology investments generally have a wide sub-industry focus when investing, which often includes FinTech. However, according to Preqin’s Funds in Market database on Private Equity Online, there has been a sharp increase in the number of solely FinTech-focused funds over the last two years. 2014 saw a record amount of capital raised by FinTech funds, with six vehicles raising $1.8bn, eclipsing the previous record of $0.8bn in 2006.
Further evidence of the attractiveness of FinTech is shown on Preqin’s Venture Deals Analyst database. H1 and H2 2014 each saw more FinTech deals completed than any other full year. Furthermore, in the first half of 2015, $5.6bn of venture capital was invested into FinTech companies, marginally short of the $6.2bn invested in the whole of 2014.
The largest FinTech-focused fund ever to close is Longreach Capital Partners I, which collected $750mn in 2006. The fund is principally focused on investments in Japan, targeting control-oriented investments with a particular focus on buyouts in the established technology and financial services sectors, as well as value opportunities driven by unstable shareholdings. FTV IV is the second largest FinTech fund ever raised, closing on $714mn in 2014. The fund was raised by FTV Capital, a FinTech-focused growth firm, and invests in innovative high growth companies in the business services, financial services, and payments & transaction processing services sectors.
The increased appeal of the FinTech industry is also evident in the number of separate accounts being awarded. According to Preqin data, there have been six such mandates awarded since the start of 2014, all managed by captive arms of banks or corporate businesses.
Moving forwards, the industry looks set to continue growing. There are currently 13 FinTech-focused funds in market looking to raise $2.3bn in capital, compared to December 2014 when there were only six funds seeking $1.4bn. The largest fund in market is Bridge Growth Partners, which is targeting $1bn and is currently on a second close having raised $300mn so far.