News that Ribbit Capital secured its seventh fund with a whopping $1.15 billion is a solid indication the fintech sector is set to rebound to a post-pandemic hot streak well into next year.
The firm, which was an early investor in ventures like Robinhood and Coinbase, has one of the highest unicorn batting averages of any VC firm. It’s worth watching where it’s putting its muscle.
The new fund’s high-dollar raise is a very public clue the COVID-inspired dip in the fintech market won’t stick around much longer. Fintech stocks have already hinted at a rebound and confidence is high that, once again, the financial services market will break big in the coming months.
“Ribbit’s remarkable track record is a solid indication that it does two things extremely well,” says fintech consultant and former investment banker Eugene Plotkin. “First, it keeps its focus trained on a single area — in this case, fintech. Restricting its investments to one sector allows it to dig deep into the industry and identify trends early. Second, they bet big. When they see something that ticks all the boxes, they’re not shy about opening up their wallet.”
Plotkin alluded to the Palo Alto, California-based firm’s recent investment in the cryptocurrency risk modeling firm Gauntlet, which recently collected $23.8 million in Series B money. Ribbit was the leading investor in the 4-year-old company’s funding.
Big moves are indicative of Ribbit’s approach. The firm was the lead investor in half of its last 10 investments, including Forma, Aside, Slingshot Finance, and Settle.
Ribbit’s return on investment (ROI) with consistently large bets marks it as an elite-level player in the venture capital game. As in any industry, it’s worthwhile to look at what the elites in investment are doing.
“When the brightest people all seem to be seeing the future the same way, it’s a good bet as to what’s coming,” Plotkin says.
Ribbit Capital’s seventh fund set its sights on a $750 million target. However, eager investors quickly overshot the goal of $400 million, hoping to capture a little more of the revenue they believe the fund can return.
Importantly, investors went in blind: The firm hasn’t announced how or where it plans to invest. However, speculators have keyed in on cryptocurrency, specifically, companies that specialize in business-to-business (B2B) crypto payments, as a potential landing spot for a large chunk of the change.
As an international firm with its finger on the pulse of fintech since its 2012 founding, Ribbit Capital is in exactly the right position to understand the advantages of using crypto for B2B payments.
“There are several advantages for businesses in using cryptocurrencies, especially for international commerce,” Eugene Plotkin says. “Not only is crypto decentralized, it also allows for faster transaction speeds and lower costs. The big question is not whether the benefits are realizable, but when and if it can make believers out of the skeptics.”
Ribbit Capital’s fundraising could signal change is already afoot. One of the biggest obstacles preventing international companies from adopting a pro-crypto attitude toward B2B payments is the same fears that have plagued the sector since the beginning: security and volatility.
Those are valid concerns. But as cryptocurrency matures, it’s looking less scary to individuals and businesses alike. Recent statistics point out nearly 300 million people worldwide have used some form of cryptocurrency. That number could climb to 1 billion by the end of 2022.
The other problem, volatility, should also quiet down with the emergence of a steady stream of users. Popular acceptance will require some companies to take leaps that seem daunting. Using crypto as a means of exchange creates accounting challenges. However, as early adopters find success, the risks of transitioning will start to feel manageable to risk-averse CEOs.
“Only when businesses begin to understand exactly how crypto can make their processes easier, will the tide begin to turn,” Eugene Plotkin says. “Imagine that you’re doing business with companies across 20 countries. If you’re paying those companies with cryptocurrency, you can just click a button and make all your payments. You don’t have to deal with all the red tape.”
Whichever companies can make that case first — and best — will be in for large paydays. And Ribbit Capital is certainly one of the most likely firms to recognize where the talent to make that argument lies.
It’s also likely Ribbit has learned from its investments in companies like CoinSwitch just what needs to happen next to unlock the market. That seems to be what investors believe.
If you need further proof, consider the last time Ribbit Capital opened a fund was January 2020, when it secured less than half of the $1.15 billion it most recently raised.
Many investors are expecting big news on the fintech front. It might be a good time to join in.
Eugene Plotkin is the founder and CEO of TechWallet, a fintech company based in New York City.