In this article, we discuss the 5 best fintech startups investors are flocking to. If you want to read our detailed analysis of these startups, go directly to the 10 Best Fintech Startups Investors are Flocking To.
5. Next Insurance
Next Insurance is an online insurance company. It is placed fifth on our list of 10 best fintech startups investors are flocking to. The company has raised over $880 million in funding so far, with the latest round in April bringing in close to $250 million. The startup is now valued at close to $4 billion, making it one of the most lucrative fintech firms in the United States. Some of the lead investors in the firm include FinTLV Ventures and Battery Ventures, among others.
Ally Financial Inc. (NYSE: ALLY), the Michigan-based bank holding company, also provides digital insurance services. On May 27, investment advisory Deutsche Bank started coverage of Ally Financial Inc. (NYSE: ALLY) stock with a Buy rating and a price target of $65. The company posted more than $6 billion in revenue last year.
At the end of the first quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $2.8 billion in Ally Financial Inc. (NYSE: ALLY), down from 57 in the preceding quarter worth $2.5 billion.
4. Chime
Chime is a financial services company that provides mobile banking services free of charge. It is ranked fourth on our list of 10 best fintech startups investors are flocking to. The startup has so far raised $1.5 billion in funding over ten rounds, with the latest round in September bringing in more than $500 million for the firm. Some of the lead investors in the company include Melo Ventures and Crosslink Capital, among others. The company is valued at over $14 billion and has been named on the CNBC Disruptor 50 list.
Another stock to watch out for in the financial services space is Intuit Inc. (NASDAQ: INTU), the financial management and software firm with a market capitalization of close to $130 billion. Intuit Inc. (NASDAQ: INTU) is a great option for income investors. On May 25, the firm declared a quarterly dividend of $0.59 per share, in line with previous. The forward yield was 0.54%.
At the end of the first quarter of 2021, 68 hedge funds in the database of Insider Monkey held stakes worth $4.7 billion in Intuit Inc. (NASDAQ: INTU), the same as in the preceding quarter worth $4.6 billion.
L1 Capital International Fund mentioned Intuit Inc. (NASDAQ: INTU) in its Q3 2020 investor letter. Here is what the fund said:
“Intuit epitomises the consistency, predictability and longevity of growth we seek in high quality businesses.
Intuit currently operates through 2 main divisions:
Software for financial and business management as well as integrated payroll solutions, merchant payment processing solutions, and financing for small businesses in the US and key global markets; and
Do‑it‑yourself and assisted income tax preparation software products and services sold in the U.S. and Canada.
Intuit also provides personal financial software and services through its Mint and Turbo products and has announced the acquisition of Credit Karma for US$7.1 billion which will significantly expand its personal finance capabilities, creating a third leg to Intuit’s growth stool…” (Click here to view the entire text)
3. Stripe
Stripe is a financial services company famous for payments processing solutions. It is placed third on our list of 10 best fintech startups investors are flocking to. The startup has raised more than $2.2 billion in funding so far over sixteen rounds. The latest round in March brought in $600 million worth of new funding for the company. Stripe is valued at close to $100 billion and is on the list of firms that are planning to make their stock market debut soon. Some of the lead investors in the firm are Allianz and AXA Group, among others.
California-based EV maker Tesla, Inc. (NASDAQ: TSLA) is one of the companies that have backed Stripe to succeed. On June 23, Tesla, Inc. (NASDAQ: TSLA) announced that it had opened an EV charging station in China that had solar and wind energy storage capability.
Out of the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Tesla, Inc. (NASDAQ: TSLA) with 24.4 million shares worth more than $16.3 billion.
Tesla, Inc. (NASDAQ: TSLA) was mentioned by Baron Partners Fund in its Q1 2021 investor letter. Here is what the fund said:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
2. Robinhood
Robinhood is a financial technology company that owns perhaps the most famous stock trading application in the world. It is ranked second on our list of 10 best fintech startups investors are flocking to. The company has raised more than $5.6 billion in funding so far over twenty-three rounds, with the latest round in February raising more than $2.3 billion. Some of the lead investors in Robinhood include Ribbit Capital and Index Ventures, among others.
As the fintech sector explodes, stocks like Square, Inc. (NYSE: SQ) have become an investor favorite over the past few months. On June 4, the share price of the company jumped close to 3% as CEO Jack Dorsey outlined plans for a Bitcoin hardware wallet. Square, Inc. (NYSE: SQ) is one of the largest institutional holders of Bitcoin.
At the end of the first quarter of 2021, 92 hedge funds in the database of Insider Monkey held stakes worth $9.2 billion in Square, Inc. (NYSE: SQ), up from 89 in the preceding quarter worth $8.8 billion.
In its Q1 2021 investor letter, RiverPark Funds, an asset management firm, highlighted a few stocks and Square, Inc. (NYSE: SQ) was one of them. Here is what the fund said:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown
from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
1. Klarna
Klarna is a Sweidsh fintech company that markets payments solutions for small businesses. It is placed first on our list of 10 best fintech startups investors are flocking to. The firm has raised more than $3.7 billion in funding so far over twenty-seven rounds. The latest round in June raised over $650 million for the company. The lead investors in the startup include SoftBank Vision Fund and Dragoneer Investment Group, among others. The startup is valued at close to $50 billion.
Another big name in the payments industry is Visa Inc. (NYSE: V), the California-based firm that facilitates digital and electronic payments. On April 28, Visa Inc. (NYSE: V) declared a quarterly dividend of $0.32 per share, in line with previous. The forward yield was 0.55%.
At the end of the first quarter of 2021, 164 hedge funds in the database of Insider Monkey held stakes worth $26.5 billion in Visa Inc. (NYSE: V), down from 166 in the preceding quarter worth $23.5 billion.
Here is what ClearBridge Investments has to say about Visa Inc. (NYSE: V) in its Q1 2021 investor letter:
“To make room for these new names with more attractive outlooks related to the reopening, we sold out of companies where the thesis is not playing out at the pace we expected including Visa.”
You can also take a peek at Billionaire Stan Druckenmiller’s Top 10 Stock Picks and Billionaire Julian Robertson On Interest Rates and His Top Stock Picks For 2021.
