A Brief Look at the Greater Boston FinTech Cluster

I now count 40 active FinTech startups in the greater Boston area, which includes Portland and Providence in my view. I did not include companies like asset manager F-Squared though they have capital from local angel investors and are focused on the use of technology to replicate portfolios. I also excluded an enterprise software firm serving the insurance industry that is run essentially as a lifestyle business. I did include several companies that have not launched yet. Some on my list may be zombies – that awkward stage in which they’re not living but not entirely dead. I thank everyone who reached out to me with suggestions.

By Year Founded

The local FinTech startup longest in tooth appears to be account aggregator ByAllAccounts, founded in 1999 and backed by Commonwealth Capital Ventures and Castille. Andera (2001), SimpleTuition (2005), and Covestor (2005) are the next oldest survivors. (Covestor was not founded in Boston but moved here.) Andera last raised capital in 2010; SimpleTuition and Covestor each raised new capital in 2013.

Here they all are, grouped by year founded:

Focus

Recent startup activity has been heavily focused on payments. Two of the eight firms founded in 2012 are involved in payments, as are a whopping five of the seven founded in 2013.

The needs of institutional asset managers are also being addressed by quite a few greater Boston startups (Capital Market Exchange, Kensho, BuysideFX, Mavenomics, OpenExchange, TripleShot), which makes sense given the preponderance of money managers in the area.

Other areas attracting multiple entrepreneurs include foreign exchange (BuysideFX, peerTransfer, Boston Technologies and PeopleHedge), algorithmic trading (Quantopian and Samurai Investments), and the RIA market (Blueleaf, Wealth2K).

Capital Raised

The startup with the most capital might be one you haven’t heard of. Direct-to-consumer car insurance agency Consumer United raised $56,000,000 last year in its first institutional round, which was led by Spark Capital. That looks like the largest investment in a Boston-area financial services or financial technology startup since Virgin’s investment in P2P lending pioneer CircleLending in 2007.

While Spark led the biggest recent round in Boston FinTech, and has also invested in several other companies, Atlas looks like the firm entrepreneurs want to get to know, backing, by my count, at least seven area FinTech startups. Other VCs investing in multiple companies include General Catalyst, Flybridge, and newly-active Fidelity-affiliated Devonshire.

Interestingly, individual angels backing these startups are rarely identified by name.

These ten startups top the league tables in total capital raised:

Company                             Capital Raised                    Most Recent Raise

Consumer United                    $56,000,000                              2013

Paydiant                               $34,600,000                               2013

LevelUp                                $28,500,000                               2013

Leaf                                     $26,000,000                               2013

Cash Star                             $26,000,000                                2012

Simple Tution                         $26,000,000                               2013

Covestor                               $23,900,000                               2013

peerTransfer                          $21,200,000                               2014

Swipely                                 $20,500,000                               2013

Kensho                                 $16,130,000                               2014

A big weakness in my data is, of course, survivorship bias. I don’t have information on the FinTech startups that launched but didn’t make it, which would include the likes of Acentas, ImpulseSave, PerkStreet, and WorldInsure; those that started here and left, like WePay and Geezeo; and those that were acquired or acqui-hired, like Currensee.

Again, if I’ve missed any firms or funding events please let me know in the comments section below. Also, if you’d like a copy of the spreadsheet I created for following these firms and their financing rounds, I’m happy to share it.