By John Stewart
While payments startups are enjoying a record flood of investment capital, venture-capital and private-equity firms aren’t the only investors spotting opportunity in these companies. Directly or through their venture arms, established companies like MasterCard Inc. and Google Inc. are pouring cash into startups as well, either to get in on a potentially good deal or to keep a hand in with a potentially potent rival.
Investment in payments startups by corporate players totaled $289 million in the first quarter, topping the $271 million they shelled out in the fourth quarter of last year, says a new report from CB Insights, a New York City-based investment-research firm that follows the startup market. That’s a record quarterly sum according to the firm’s numbers, which track corporate investment going back to the beginning of 2010. For the most recent four quarters, these investors wrote checks totaling $653 million on 27 deals, more than quadrupling the $150 million invested in 22 deals in the previous four quarters.
Recent capital injections of note include a $75 million Series C round in January for Bitcoin startup Coinbase Inc., San Francisco, in which BBVA Ventures took part, and a $70 million Series C round in December for Pittsburgh-based card-technology company Dynamics Inc., in which MasterCard had a hand. BBVA Ventures is the San Francisco-based venture arm of the major Spanish bank Banco Bilbao Vizcaya Argentaria.
The record so far for corporate investment in payments is $582 million on 23 deals in 2012, a level that it appears 2015, whose first quarter saw seven deals, will easily exceed.
The top two corporate investors in payments startups are Intel Capital and MasterCard, according to CB Insights’ data. Also on the list of top investors are both American Express Co., investing directly, and its venture arm, American Express Ventures, as well as Google Ventures, Citi Ventures, Visa Inc., and SK Telecom Ventures.
Corporate investors have taken a hand in what has become a geyser of cash pouring into payments startups. All told, investment in these firms totaled just over $1 billion in the first quarter from corporate sources as well as venture-capital and private-equity firms. This follows $1.31 billion injected in the fourth quarter of 2014, more than double the previous high-water mark of $633 million seen in the third quarter of 2012.