The top trends in fintech for 2023, according to VCs

Although VCs invested record amounts of cash in fintech startups in 2021, per PitchBook data, deal value fell in 2022. Many investors predict that the funding environment will remain difficult this year, but they remain super optimistic about the sector: “The opportunity is so big and can overwhelm most software as these business models figure out,” Jesse Wedler, a general partner at Google parent Alphabet’s independent growth fund CapitalG, told me on a recent visit to its San Francisco office.

But where do VCs see opportunities, and what do they predict will happen and change in the busy space this year? I recently asked eight top VC investors what they think for 2023, and their predictions range from what kind of startups are “under the radar” to why we’ll see a trend toward more “tailored” financial products. You can read the full story here, but below are some highlights.

CFO tools will be ‘in vogue’

Bain Capital Ventures’ partner Christina Melas-Kyriazi believes tools that help CFOs do their jobs “with greater accuracy and with [fewer] people are going to be in fashion, because there are some things that are happening,” she said, one of which is: “Business models are changing, so there are more utility-based business models and it’s becoming more complex to know what your income and expenses are. is any time and you are facing downward pressure from the market. Maybe you have to cut the number of employees; you have to cut costs. So tools that help CFOs do that are going to…have even more traction than they already have in recent years.”

Security in software

When broader economic times are tough, some business models (such as those based on lending, for example) may struggle. CapitalG’s Wedler predicts that consumer fintech will be “challenged” in 2023, but that VCs will flock to “the safer business models” over the next 12 months, such as software sales to banks and other financial services providers. “It’s just a very easy-to-understand software-type business model that’s usually lower risk, lower burn.”

A fintech boom in Israel

Laura Bock, a partner at fintech-focused VC firm QED, said that on a recent trip to Tel Aviv with the firm, she and her team were “inspired” by innovation coming out of Israel. She predicts that “We will see more fintech winners emerge from that geography, following in the footsteps of Payoneer, Melio and Next.”

AI + fintech

In case you hadn’t noticed, AI is on the brain for VCs, as I and others have written about recently. Grace Isford, a partner at Lux Capital, bets that by 2023, “We will see major language models penetrate fintech.” She argues that “Building on existing [machine learning and A.I.] by adoption, it will be a task for fintech companies to leverage large language models to process and prioritize claims, coordinate workflows, improve banking services and strengthen risk management for payments and guarantees.”

For the rest of the fintech predictions from VCs at Bessemer Venture Partners, Accel and others, check out my story here.

See you tomorrow,

Anne Sraders
Twitter: @AnneSraders
Email: [email protected]
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Jackson Fordyce curated the offers section of today’s newsletter.

VENTURE OFFER

– Monogram healtha Nashville-based evidence-based provider of care and benefits services for patients living with polychronic conditions, raised $375 million in funding. CVS Health, Cigna Ventures, Humana, Memorial Hermann Health System, SCANNING, TPG Capital, Deadline Cressey Ventures, Heritage Group, Pura Vida Investmentsand Norwest Venture Partners invested in the round.

– Kronospherea New York-based cloud-based application monitoring company, raised $100 million in funding led by GVaccording to The Information.

– Synthekinea Menlo Park, Calif.-based engineered cytokine therapeutics company, raised $100 million in Series C funding led by The column group.

– Brick and Bolta Bengaluru, India-based residential construction firm, raised $10 million in funding led by Accel and Celesta capital.

– C14a New York-based payment platform for Web3 businesses, raised $2.5 million in funding led by General catalyst.

PRIVATE EQUITY

– Vista Equity Partners agreed to acquire Duck Creek Technologiesa Boston-based property and casualty insurer, for $2.6 billion.

– Beach Point Capital Management took over a majority share in Botanical design, a Seattle-based commercial landscape architect. Financial terms were not disclosed.

– Lacerta Groupone SK Capital portfolio company, bought the assets of Portage Plastic, a Portage, Wis.-based manufacturer of thermoformed packaging products. Financial terms were not disclosed.

– Golden Gate capital took over a majority share in Parallel advisers, a San Francisco-based wealth management firm. As part of the investment, Parallel advisers also acquired AUTUS Asset Management, a Scottsdale, Ari.-based asset management firm. Financial terms were not disclosed.

– Next level clothinga Blue Point Capital Partners portfolio company, acquired Stedman, an Aachen, Germany-based casual and sportswear design and manufacturing company. Financial terms were not disclosed.

– Omega System Consultantsa Pentecost portfolio company, acquired The TNS Group, a Stamford, Conn.-based provider of managed IT, security and disaster recovery services. Financial terms were not disclosed.

– PNC Riverarch Capital acquired Backerhaus Veita Mississauga, Canada-based European-style bread maker from Swander Pace Capital. Financial terms were not disclosed.

DEPARTURE

– Nuvei Corporation agreed to acquire Paya Holdingsa Montreal-based payment platform, from the portfolio company GTCR. The agreement has a value of 1.3 billion dollars.

OTHER

– AstraZeneca agreed to acquire CinCor Pharmaa Waltham, Massachusetts-based biotechnology company, for as much as $1.8 billion.

IPOS

– WeDoctora Hangzhou, China-based online healthcare platform plans to file for an initial public offering by the end of April in either the United States or Hong Kong, according to Bloomberg. Tencent Holdings supports the company.

HUMAN BEINGS

– Battery Venturesa Boston and San Francisco-based investment firm, promoted Zak Ewen to partner.

– Clayton, Dubilier and Ricea London and New York-based private equity firm, employed Dan Glaser as operating partner. Previously he was Marsh McLennan.

– EnCap Flatrock Midstreama San Antonio-based investment manager, promoted Tray Knowles to the managing director.

– Infinedi partnersa New York-based private equity firm, promoted Dan Conlon to vice president.

– Cartridgea San Francisco and Santa Monica-based venture capital firm, hired Amber Atherton as a partner. Earlier she was involved Disagreement.