Fintechs look to capitalize on flush M&A market
The largest independent robo advisors profited sizably from a strong M&A market last year and now smaller fintech startups are looking to land larger influxes of cash.
The biggest winners of the past 12 months include Wealthfront, which secured $75 million in January, and Betterment, which attracted $70 million last July. Now, smaller digital platforms are looking to cash in.
Trizic, which develops enterprise platforms for wealth management firms that offer digital advice, secured $10 million in funding — their largest haul to date. Backed primarily by venture capital firm Sorenson Ventures, the latest infusion will help expand the firm’s sales and deployment operations.
“We’re focused on staffing up more people because there’s a lot of demand and with that you need a large sales force,” says Trizic CEO Drew Sievers. “Secondly, is engineering. Almost 90% of the company is engineers and we’re going to add even more.”
M&A activity for all fintech sectors was up last year, according to KPMG’s Pulse of Fintech study. Total funding totaled $8.7 billion over 154 deals in 2017, backed by a strong economy and substantial increases in private equity, according to the study.
“[Firms] are starting to invest in and acquire small fintechs themselves,” says Anthony Rjeily, digital and fintech practice leader for KPMG. “This is a new dynamic in the fintech funding space, but one we will continue to see moving forward.”
U.S. fintech investments accounted for almost half of all global funding at $15.2 billion for the year, according to the study. Investments topped $5.8 billion in the fourth quarter alone.
Trizic made two funding rounds in 2017 including a $3.3 million influx in February. The San Francisco-based firm has approximately 60 RIA clients with upwards of $8 billion in client assets, according to Sievers. Their largest enterprise client is John Hancock and its wealth management arm Signator Investors, which has 30,000 accounts and $5.5 billion in AUM, according to their Form ADV.
For Sievers, the digital wealth management space will continue to open up opportunities for the mass-affluent client, and technology will help firms, especially in the bank channel, offer digital tools at low cost.
“How do we provide wealth offerings to people with less than a quarter million?” Sievers says about where fintech funding will likely land in the near future.
“Firms like State Street Global Advisors have really top-performing funds and ETFs, and if those can be easily acquired in a well-thought-out, suitable, appropriate investing strategy that’s automated, now someone with $5,000 can get access to tools that used to be prohibitive,” Sievers says. “Banks can offer it, RIAs can offer it — and actually handle it because it’s all automated. That’s where we come in.”