Focused fintechs get the nod from Silicon Valley
Silicon Valley once threw money at start-ups that aimed to disrupt broad swaths of finance. Now it is rewarding those that have sharpened their focus.
While overall venture funding into lending start-ups is slowing, some platforms still are raising money by taking aim at narrower or less-traditional borrowing niches than the first generation of financial-technology firms.
Faced with a glut of online lenders and cooling interest from investors in some loans, a newer crop of fintech start-ups is focusing on areas including loans for real-estate projects, people with poor credit ratings, car buyers and, at the extreme, people getting married.
Venture funding for US lending start-ups dropped to $US298 million in the first quarter from $US832m in the last three months of 2015, according to Dow Jones VentureSource. The largest commitment in that shrinking pool was $US150m for Flurish, whose LendUp platform focuses on borrowers with limited or poor credit history, according to VentureSource. Nine of the 11 fundraisings in US lending were for earlier-stage companies, a change from recent quarters, when late-stage start-ups did more fundraisings.
“You have a lot of established players in areas like credit-card refinancing,” said Joshua Jersey, chief executive of Promise Financial, which focuses on loans for weddings. “It’s a strategic imperative of younger platforms to have a narrower focus.”