Money flows into the fintech sector while China reigns in lending

Finance industry

Finch Capital, a Venture Capital company, closes its latest €150 million fund to invest in Series A and B deals in Europe. The company with London and Amsterdam locations already has €85 million in capital ready to deploy for what it’s calling the ‘Europe III’ fund.

Finch just closed on some serious cash to fund European startups.
Finch just closed on some serious cash to fund European startups.

One of the fund’s partners, Radboud Vlaar, noted that the firm is seeking more ownership stake in its portfolio companies. “Our strategy is fairly dynamic in terms of ownership but specific in terms of theme: we can aspire for 30-40% in certain companies as well as the more traditional stake of 15-25%,” Vlaar said. 

Finch hopes to fill a void for tech companies in Europe that have outgrown seed-stage funding but aren’t yet large enough to warrant investment from the industry’s larger institutions. The firm has already made many investments in the fintech space and other tech areas, including startups like Trussle, Fourthline, Goodlord, Grab, Hiber, BUX, Twisto, and Zopa.

The SPAC craze lives on

One of the hottest financial trends is the special purpose acquisition company, or SPAC. A SPAC is essentially a shell company listed on a public exchange used to acquire a private company, which can then be listed publicly without going through the hassle of an initial public offering (IPO).

Lakestar is the latest firm jumping on the SPAC train.
Lakestar is the latest firm jumping on the SPAC train.

Now, a €275 million SPAC is being launched on the Frankfurt Stock Exchange by European venture capital firm Lakestar. The sole purpose of this vehicle is to purchase a technology company in the region. Lakestar’s CEO Klaus Hommels sees this as a huge opportunity given Europe’s tech sector’s growth.

The European technology sector today offers attractive investment opportunities with promising valuations and many excellent growth companies,” Hommels said in a statement. “As a team, we are deeply embedded in Europe’s growth-stage and pre-IPO ecosystem and have high-quality access to assets, as well as an extensive deal-sourcing network.”

Another fintech unicorn

Earnix is the latest fintech unicorn to join the club.
Earnix is the latest fintech unicorn to join the club.

The fintech industry has seen its fair share of billion-dollar valuations over the past several years, and now it can add one more name to the list. Earnix, an Israel-based fintech startup, recently raised $75 million at a $1 billion valuation. The company focuses on artificial intelligence software for banks and insurers, allowing them to provide better, more personalized services to their customers.

Jonathan Rosenbaum, principal at Insight Partners who led the funding round, spoke of the strong demand for Earnix’s services in the current market. “Customers across insurance and banking have a strong mandate to adopt new technologies and related processes so as to remain competitive,” said Rosenbaum.

China cracking down in the online lending sector

China's recent legislative moves could have a huge effect on its technology giants.
China’s recent legislative moves could have a huge effect on its technology giants.

An industry that has run rampant with fraud in China is being reigned in. Starting in 2022, online lending platforms in the country will be forced to contribute 30% of their own capital for loans with commercial banks. This also goes for digital banks, trust companies, car loan providers, and other lenders.

Already established lenders like Ant Group and JD Digits currently only contribute about 2-4% of a loan’s value in these instances but will now be forced to comply with this regulation. These industry giants will likely have to change their business models to continue with this type of lending, says Michael Pettis, a finance professor at Peking University. “This will raise financing costs for consumers and will cripple one of the fastest-growing business segments for Ant, almost certainly forcing a steep drop in its eventual valuation,”

And that’s it for the month! Follow this space to stay on top of the must-know fintech news.