2022 was a challenging year for the fintech sector. Funding dried up, stocks plunged and many companies were forced to shut down or sell themselves. But despite a trying environment that was marked by an uncertain economic picture and growing recession fears, Sequoia Capital, one of the most  prominent private equity and venture capital (VC) firms in the world, remained optimistic about the prospect of fintech, making the sector its top investment category in 2022, a new analysis by CB Insights, a business analytics platform and global database, found.

Fintech represented nearly a quarter of the firm’s deals in 2022, the report says, with most deals going towards fintech startups in the capital markets, payments and payroll and benefits segments. These categories made up for 16% of Sequoia’s total fintech investment deals, each, and were the firm’s top three fintech targets.

Sequoia Capital’s fintech investments in 2022, Source: CB Insights

In capital markets, Sequoia Capital invested in four companies, participating in Citadel Securities’ US$1.2 billion VC round, Capitolis’s US$110 million Series D, Watershed’s US$70 million Series B and Ledgy’s US$23 million Series B.

Citadel Securities is one of the world’s largest market markers and is active in more than 50 countries; Capitolis provides a capital marketplace for financial institutions and institutional investors, and portfolio optimization solutions; Watershed is a climate tech company that provides both a carbon accounting platform for businesses to measure and track their carbon footprint, and a carbon offset marketplace; and Ledgy is an equity management platform for high-growth startups and scaleups.

Three of these deals were follow-on investments, demonstrating Sequoia Capital’s faith in the future of capital markets tech, the report says.

In payments, the firm’s investments spanned consumer and business use cases. The companies that received funding from Sequoia Capital last year operate in four distinct markets, namely buy now, pay later (BNPL), expense management, peer-to-peer (P2P) payments and online payments acceptance.

Klarna, which secured a US$800 million private equity round in July 2022, is the world’s BNPL leader, providing retailers with payment options including installments, delayed payments, monthly financing and an interest-free card. Yokoy, a Swiss startup that secured a US$80 million Series B in March 2022, provides an all-in-one solution that automates spend management for midsize and enterprise companies through artificial intelligence (AI). Telda, an Egypt-based startup that raised US$20 million in a Seed round in October 2022, runs a consumer money app that offers a Mastercard debit card and spend tracking tools. And Cococart, a Singaporean startup that raised US$4.2 million in March, provides an e-commerce platform with tools for creating online stores easily with no code, no design and no app downloads.

In the payroll and benefits vertical, Sequoia Capital doubled down on its commitment to the sector by making four investments last year. All four were follow-ons to existing portfolio companies and involved Remote, a remote workforce management platform that secured a US$300 million Series C in April 2022; Rippling, an all-in-one employee management software that links human resources, IT and finance, which raised US$250 million in a Series D in May 2022; CaptivateIQ, a sales compensation management platform that secured a US$100 million Series C in January 2022; and Truework, a startup that leverages payroll data to help lenders verify borrowers’ income and employment which raised US$50 million in a Series C in August 2022.

Besides these three verticals, Sequoia Capital also made investments across a variety of fintech sectors last year, including personal finance, real estate, accounting and taxes, cryptocurrency, business banking and regtech.

Notable rounds the firm participated in in 2022 include Personetics’s US$85 million growth funding round, Zefir’s US$22.7 million Series A, and Found’s US$60 million Series B.

Personetics is a fintech software company specializing in personalizing banking experiences; Zefir is a French online real estate marketplace; and Found is a banking and tax app for small-business owners, freelancers, and the self-employed.

Sequoia Capital isn’t the only prominent VC firm that invested significant amounts into fintech last year. A separate report by CB Insights shows that Andreessen Horowitz (a16z) remained very active in the fintech space across various deal stages, valuations, geographies, and sub-industries in 2022.

According to the analysis, almost a quarter of a16z’s 206 startup deals last year went to fintech companies, making it the firm’s top investment category. In 2022, a16z’s fintech investments were centered around payments and blockchain startups, which made up for 28% and 22% of its fintech deals.

Andreessen Horowitz’s fintech investments in 2022, Source: CB Insights

In 2022, investors scaled back their investment pace drastically amid slumping public markets. This pushed startup investment down and led fintech funding to decline by a sizeable 46% last year. Mega-rounds of US$100 million and up accounted for just US$36.5 billion, marking a 60% drop from 2021’s record activity, data from CB Insights show.

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