Acquisition is one of the fastest methods toward growth.
Take the FinTech Startup I just invested in for example.
Their application’s proprietary percentage-based micro saving technology allows users to save money as they spend…
By taking a percentage of each transaction they make and saving it towards a short-term goal (car down payment, vacation, new car, etc.).
As if that alone wasn’t enough to attract the eyes of potential buyers…
This startup also collects some extremely valuable data; arguably one of their most attractive assets.
They know what product each user is saving for, how much money they are saving, when they want to buy it, and where they spend their money.
Buyout potential for something like this is pretty much endless.
And to show you that acquisitions in the FinTech world are a pretty big deal…
I’ve put together a report with some of the latest buyouts in the space and how much they went for.
Big Things Happening in FinTech
Regular people are more comfortable than ever with FinTech. The tools that bring finance online and on-demand are taking over the industry.
We just made our biggest investment yet, into a FinTech startup with a percentage-based cashback savings app. Click here to learn how you can invest right now.
People are banking and sending money from the palms of their hands. The younger generations especially are moving away from the slow-moving and bureaucratic world of legacy finance. FinTech has swept in and offered them better alternatives.
Consumers aren’t the only ones to have embraced FinTech, big businesses use it too. Tools that improve accounting, payment processing, and financial security are in high demand.
And perhaps the biggest news in FinTech today is the crazy number of high-valuation acquisitions that persist through the recession.
Why Acquisitions Aren’t Slowing Down
With all that’s happening economically during this global pandemic, you might think that startup exits have come to a halt.
In terms of IPOs, you would be mostly right (even though insurance app Lemonade just went public for $319 million in July).
However, you may be surprised to hear that M&A activity hasn’t really slowed down. Big businesses are still buying up great ideas at a healthy rate — especially in FinTech.
The interesting thing is, this has happened before. Historically speaking, acquisition activity does persist through a recession.
Let’s look at the Great Recession.
According to the National Bureau of Economic Research…
In 2007, there were 12,121 mergers and acquisitions in the United States. Next year in 2008, that number had dropped to 10,156. In 2009, it dipped down to 8,281 before climbing back up in 2010. That isn’t the catastrophic decline you’d expect.
Compare this to the fact that in Q2 of 2008 there were zero IPOs for the first time in U.S. history. And yet, there were 10,156 M&As…
How can that be?
The reason acquisitions persisted then (and are doing the same now) is that acquiring business is often the best way for a large company to grow and adapt. Acquisitions give large companies a chance to pivot, stabilize, and rebrand.
The truth is, more of these big players are substituting R&D for M&A. Sometimes, it’s simpler to buy innovation than to develop it yourself.
Why Acquisitions are Attractive to Angel Investors
Early exits are important to angel investors, and acquisitions are usually the quickest kind around. When big companies see an opportunity, they pounce. This means juicy startups, like the one we just invested in, are likely to be bought up quickly.
Unlike venture capitalists who operate on fixed fund cycles and must distribute returns to their partners, angels are loose, liquid, and mobile.
As soon as returns come in, they can be reinvested into their startup portfolio, no waiting period, no distribution of funds. Returns can be quickly flipped into new startups — growing your portfolio and reducing risk. A 5X return can be spread across five more startups. This way, a risky portfolio can quickly grow into a diverse and stable one with an excellent risk to reward profile.
Acquisitions help to expedite the cycle of exits and reinvestments.
Right now, you can invest in the same FinTech startup we just dropped $200,000 into with this Boardroom Spotlight offer. They’re doing what Big Banks have yet to do –– allowing users to “save while they spend” with proprietary percentage-based micro saving technology.
Recent Major FinTech Acquisitions
Things are moving quickly in FinTech right now. Startups are being acquired at an incredible rate. Even with the economic wind-down caused by COVID-19, the FinTech space still shows outstanding signs of activity.
Here are a few recently acquired FinTech startups worth checking out.
Worldpay
In June of last year, payment processing company Worldpay was acquired by Fidelity National Information Services for a ridiculous $34 billion.
Before that, Worldpay had already acquired 5 startups of its own.
This was a FinTech goldmine — before the acquisition, it was the largest U.S. merchant acquirer in terms of transaction volume.
Plaid
Plaid develops financial services APIs. Basically, it helps developers share banking information more easily. This was a perfect fit for Visa, which announced that it will be acquiring Plaid for $5.3 billion.
Before the acquisition, Plaid had raised $309.3 million in funding and acquired Quovo, a FinTech startup working in account aggregation and data analytics for the financial industry.
Honey
Honey is a free browser extension that automatically finds and applies coupons at checkout. On top of that, it saves users money on Amazon by showing them price history, offering “best price detection”, and giving them a customizable watchlist of products.
After raising $31.8 million, Honey was acquired by PayPal for $4 billion.
Verse
P2P money-sharing app Verse just landed a deal with FinTech giant Square. A competitor to apps like PayPal and Venmo — Verse raised $37.6 million in funding and was then acquired for between $34 and $56 million.
iZettle
iZettle is a competitor to Square. While Square has seen success in the U.S., it has been slow to expand internationally. iZettle is taking over the European market where Square has no foothold.
iZettle raised around $325 million in funding and was then acquired by PayPal for $2.2 billion.
Why Our Latest Startup Deal is Likely to be Acquired
A few clear signs point to our latest startup getting acquired sometime down the line.
- The team has some of the best talent in the FinTech industry.
The very same masterminds that turned Acorns into an $860 million monster have joined the management team of this new app.
This banking, savings, lifestyle app is the next logical step after Acorns. The outstanding team is filling in the gaps left behind by Acorns and learning from its mistakes.
- The platform is acquiring new users at industry-low costs.
The faster the company can scale the faster it will become a shining opportunity for big businesses. With industry-low Customer Acquisition Costs of $14 and outstanding marketing channels, this startup won’t have any problem conquering the market.
A larger user base not only means more customers but more data. Which leads me to my next point…
- The user data is a goldmine to an acquirer.
Probably the number one thing that will attract acquirers is the data. On top of loads of standard user data, this startup collects some very interesting data. They know what product each user is saving for, how much money they are saving, and when they want to buy it.
It’s easy to see how many brands could utilize this information. In FinTech acquisitions, sometimes it all comes down to the data. And this FinTech is well aware of the value their data has.
