According to CB Insights, financial services firms, including banks, have invested in startups at a record pace this year. Corporate venture deals with financial institutions have surged 500 percent during the last five years. Half of those deals are in California.
Both Citi Ventures and Goldman Sachs have heavily invested in private startup ventures. Citi has had 66 venture deals, and Goldman has had 64. However, Goldman Sachs has backed more unicorn deals, that is deals with startups valued at more than $1 billion.
Banks are finding venture investments more appealing as interest rates fall, and financial firms look for more ways to diversify. To add to the incentive, fintech competitors such as Paypal, Square, and Robinhood, frequently offer the same services with no fees.
The result is that corporate venture capital funding is setting a record, with banks leading the way.
Financial services firms invested a record $8 billion into 329 startup deals in 2019 thus far. Deals have increased eightfold between 2014 and 2018. The third quarter of this year has seen the highest activity to date.
Google, Airbus, and American Express, among others, have set up their own venture capital arms to make investments during the early stages. This way, they’re able to form strategic partnerships with startups. This allows them a technological advantage as well as an ability to target potential acquisitions. Eventually, the companies profit when their investments perform well.
Startup funding has brought in a record $25.4 billion of funds through September.