Wealthtech funding drops 21% to $4.4 billion in Q2

Wealthtech funding lagged during the second quarter after a strong start to the year, according to CB Insights’ latest State of Fintech report. 

Funding in wealthtech fell by 21% quarter over quarter to $4.4 billion, while deal activity grew slightly to 88 deals. By comparison, funding reached a record $5.6 billion during the first quarter across a total of 86 wealthtech deals that took place. Still, total wealthtech funding this year has well outpaced 2020’s year-end total funding of $5.2 billion. 

Despite the slump, 12 wealthtechs raised more than $100 million in mega-rounds that drove the majority of the funding (77%) during the second quarter. Robinhood typically led these mega-rounds in past quarters, but instead made its long-awaited public debut after a wild year for the startup leaving room for other wealthtechs to lead in funding. 

Addepar, a cloud-based software used by wirehouses like Morgan Stanley and registered investment advisers to track and analyze portfolios, announced a $150 million mega round in June that propelled its valuation to $2.17 billion. 

Alternative investment platform YieldStreet also announced a mega round of $100 million as the popularity of alternative assets rises. YieldStreet is a fintech company that opens access to investment products across a range of asset classes that were previously unattainable for the everyday investor. 

Other notable alternative investing platforms that raised money during the second quarter include a $13 million round for Rally, a platform that securitizes unique, high-value assets and offers shares as equity investments to users of all income levels. Starstock raised $8 million to grow its marketplace for sports card hobbyists.

Rocket Dollar, a wealthtech company that allows users to invest in non-traditional assets like startups, peer-to-peer lending, small businesses and real estate, raised $100,000 backed by investments from Envestnet Yodlee Launchpad and Onramp Insurance Accelerator. 

Outside of alternatives, Germany-based wealthtech platforms raised mega-rounds from global investors. Trade Republic, a mobile-only and commission-free broker that offers extended trading hours, raised $900 million pushing its valuation to $5.3 billion. Scalable Capital, an online wealth manager and neobroker that helps users with long-term systematic wealth creation raised $183 million pushing it to unicorn status with a $1.4 billion valuation. 

The SPAC craze within the wealth management space also continued during the quarter, the report noted.

Following the recent mergers of MoneyLion, eToro, and SoFi, celebrity-backed robo-adviser Acorns announced it would merge with Pioneer Merger Corp., which is set to value the combined company at $2.2 billion, in late May. The startup will trade on the Nasdaq under the symbol “OAKS” after the deal closes, which is expected to happen in the second half of 2021.