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Fintech funding flowered for payments companies in May

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Fintech funding flowered for payments companies in May

Payments companies took center stage in May among the U.S. financial technology sub-sectors tracked by S&P Global Market Intelligence in our monthly look at funding trends, attracting over $500 million in investor capital. Interest in investment technology remained high, with that space producing the most number of transactions, but it did not top the list in terms of dollar amount as it did in April.

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A $250 million raise from Tradeshift Inc. gave a big boost to the payments sub-sector total. Founded in 2009, the San Francisco-based company focuses on software for supply chain management, including payment applications. Tradeshift Pay, for instance, provides a series of digital options for paying suppliers, and Tradeshift Cash uses blockchain technology for invoice financing. The series E round — which included Goldman Sachs Group Inc., among others — values the company on a post-money basis at $1.1 billion. That is more than double the $500 million valuation it received in its series D round, which closed in June 2016.

But while the payments space as a whole brought in a bundle in May, the largest single raise came from the investment tech arena. Trading app maker Robinhood Financial LLC added $363 million to its coffers in May, after completing a series D round of funding. The latest raise is more than three times the size of its series C round, which closed in April 2017, and assigns a much richer valuation. The most recent infusion values Robinhood at $5.6 billion on a post-money basis, 4x higher than the $1.3 billion valuation it received in the series C round.

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Robinhood's massive growth might be justification for such a valuation. Its platform reached over 4 million users as of May 10, the company said. Taken in conjunction with its November 1, 2017, statement that it "just crossed three million," this would imply that Robinhood added over 1 million users in roughly six months. That is remarkable growth in comparison to E*TRADE Financial Corp. Throughout all of 2017, the number of brokerage accounts at E*TRADE rose by roughly 172,000 to 3.6 million. Given that E*TRADE's standard commission on U.S. equities is $6.95, versus zero for Robinhood, it is not hard to see why customers would be interested. Still, it is impressive that Robinhood was able to build its brand so quickly, as it was incorporated less than six years ago.

Robinhood plans to use its latest capital raise to boost its staff and invest in infrastructure, as well as expand its product offerings. But it did not need a capital raise to embark on the last of those goals. Earlier this year, for instance, it jumped on the cryptocurrency bandwagon, announcing in February that a select group of customers could buy and sell Bitcoin and Ethereum using its Robinhood Crypto service. While the crypto service was only available in five states to start, Robinhood plans to add "many more states" in the future.

Digital Currency Group topped our list of the most active investors, continuing its mission of funding blockchain and cryptocurrency companies. Our analysis aggregated investors at the holding company level, which for Digital Currency Group meant DCG Holdco Inc.

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The largest funding round Digital Currency Group participated in during May was a $110 million raise from Circle Internet Financial Inc., a company that provides a number of crypto-based financial services. Circle provides a platform for investing in cryptocurrency, as well as a payments service, in addition to operating a cryptocurrency trading desk and exchange. Digital Currency Group was just one of many investors, however. The investment was led by Bitmain Technologies Ltd. and included several existing investors, as well as new investors Blockchain Capital and Tusk Ventures. The round valued Circle at $3 billion on a post-money basis.