2019 saw a stampede of fintech unicorns

Two years ago, we created the Matrix FinTech Index to highlight what we saw as the beginnings of a 10+ year mega innovation wave in financial services.

The trillion-dollar financial services industry was going to be turned on its head over the next decade, and we were just getting started. At the time, the top 10 publicly traded U.S. fintech companies had just surpassed the $100 billion mark in terms of total market capitalization, 12 unicorns had emerged in the category, and the U.S. VC industry had just poured in $6.7B — a record at the time.

As we predicted last year, the innovation cycle continues, and we are transitioning into its mid-phase. So what happened in U.S. fintech in 2019? In short, monster growth.

On the public side, fintechs delivered resoundingly. PayPal alone gained $26B in market capitalization. On a return basis, the public Matrix FinTech Index continued to crush every major equity index as well as the financial services incumbents. Nicely matching our forecasts, our Index delivered 213% returns over the last three years. The Index outperformed the financial services incumbents by 151 percentage points and the S&P 500 by 170 percentage points.

The Matrix FinTech Index: 2019 Edition offers a refreshed update of last year’s index. As a quick reminder, the Matrix FinTech Index is a market-cap weighted index that tracks the progress of a portfolio of 10 leading public fintech companies. For comparison, we also include another portfolio of 10 large financial services incumbents (companies like JP Morgan and Visa), as well as the S&P 500.


Matrix U.S. fintech index, 2019

Matrix U.S. fintech index, 2019

Definition: Matrix Partners considers “fintechs” to be venture-backed organizations that are (a) technology-first companies that leverage software to compete with traditional financial services institutions (e.g. banks, credit card networks, insurers, etc.) in the delivery of traditional financial services (e.g. lending, payments, investing, etc.) or (b) software tools that better enable traditional finance functions (e.g. accounting, point-of-sales systems, etc.).

On the private side, VCs poured $16B into fintech startups, a 24% increase over the prior year and a 51% increase over 2017. Fifty-two companies are now on the Matrix Index “Brink List,” comprised of companies that have raised >$100M but are not quite yet valued over $1B.

U.S. fintechs that have raised >$100M but are not yet valued over $1B.

In 2019, nine companies grew into unicorns, of which there are now 31. For the first time, their combined valuations eclipsed the $100B milestone. (We wrote that the number of companies would close in on 30 and the value would cross $90B.)

10 most valued private fintechs in the U.S.

Liquidity has proven scarcer. None of the companies that were unicorns at the end of last year exited this year. As a result, liquidity contracted compared to 2018, both by number of exits and realized value. We see two reasons companies are staying private longer. First, late-stage founders have continued to find cheap late-stage capital readily available in the private markets.

Out of the eight largest unicorns, six raised additional capital in 2019. Those companies ranged from $3.7B to $35B in valuation. Second, those high private market price tags put many M&A opportunities out of range for the incumbents. Though deep-pocketed, corp dev teams at traditional would-be acquirers have been more conservative with their valuations than private market late-stage investors.

Aggregate value for venture-backed liquidity events greater than $100M

 Predictions for 2020

  1. The Matrix FinTech Index will outperform the S&P 500 by 2x. It will be another banner year for fintech public equity returns.
  2. Only one fintech company will go public (SoFi) and none of the unicorns will be acquired. Overall, it will be another tough year on liquidity for fintech.
  3. Competition from international players will be massively disruptive to the U.S.- born major fintech players. The banking entrants will spend lots of money but not gain much traction. Afterpay will emerge as a behemoth and one of the most disruptive foreign fintech players to have entered the U.S. market.

Key players to watch as they continue their early push into the U.S.:

  • Payments: Afterpay, Klarna
  • Banking: Revolut, Monzo, N26


International fintech companies entering the U.S. market


Matrix is an investor in Afterpay, Earnin, Poynt and Taulia.