Taking Stock of the Boston FinTech Landscape in 2017

Amidst the surge in interest and investment in financial technology over the past five years, several cities around the world have been vying to become the world’s premier FinTech “hub”. To date, London and New York have perhaps gotten the most interest — along with Silicon Valley, these areas have indeed attracted the bulk of the venture capital activity, and each has well-developed supporting infrastructures of VC funds, incubators, meetups, and community events focused on financial services startups.

Source: PitchBook; Note: MA serves as a proxy for the Boston Metro area

In this context, it’s easy for the Boston metro area to feel a little left out, given that Massachusetts has attracted less than 3% of the US venture capital investment in FinTech between 2011 and 2016 (placing fifth behind California, NY, Illinois and Texas). Contrast this with the broader entrepreneurial community in the region, which has long been considered a leader — drawing in ~9.5% of US VC investment over the same time period and benefiting from the heritage of the iconic tech companies built here over the past few decades. Finally, Boston boasts a thriving financial services sector that employs over 100K people across some of the world’s largest asset managers (e.g., Fidelity, Wellington), custodial banks (State Street) and insurers (MassMutual, John Hancock, Liberty Mutual).

However, there are a lot of reasons to believe this gap is about to close. In honor of the fourth FinTech Sandbox Demo Day this week, this post intends to take a tour through at Boston’s FinTech scene — the startups, corporates, VCs, and ecosystem participants that are working to push Boston into its rightful place in the FinTech conversation — as well as serve as a resource for entrepreneurs and professionals looking to explore this fast-growing hub for innovation in financial services.

Note: Categories are non-exhaustive. Let me know if I missed something and I’ll add it!

Startups and Investment

Boston has well-funded FinTech startups across a wide array of sectors, with pillar companies across the payments, capital markets, and insurance sectors (the only notable gap is in the lending sector, which has dominated the FinTech mega-rounds elsewhere in the country). Kensho’s recent $50M Series B has grabbed the headlines recently, but Circle, Quantopian, EverQuote and Toast have all raised $20M+ rounds in the last year as well. Rounding out the top ten:

Source: Pitchbook

The prevalence of Boston-based VCs as investors in these companies is notable, as Bain Capital Ventures, Bessemer, F-Prime Capital, Spark, General Catalyst and others appear across several (and many more further down the list).

Despite the promise of these startups, the Boston area is yet to see its landmark FinTech exit. The two largest in recent memory both hail from the mobile payments sector: Paydiant (sold to PayPal for $280M in 2015) and LoopPay (sold to Samsung for $250M in 2015).

Ecosystem

No startup hub thrives without a strong network of supporting non-profits, industry groups and corporates. While each player deserves a blog post on its own, I’ll focus on just a few here:

• FinTech Sandbox: Since opening its doors in 2015, the FinTech Sandbox has helped countless FinTech startups build great products through access to free data, hosting, and mentoring from around the Boston FinTech community. Backed by some of Boston’s largest financial services firms, data vendors and VCs, the group just hosted its fourth demo day this week at Fidelity Labs, and many more to come.
• The Boston FinTech Meetup: The first Boston FinTech Meetup was held in the fall of 2013, drawing just 13 people around beers and pizza. 2,000+ members and dozens of meetups later, the group now serves as the premier meeting place for entrepreneurs and financial professionals alike to network and discuss all things FinTech. Alongside the FinTech Sandbox, LOFT and several others, the group helped spearhead the recent Boston FinTech Showcase, and upcoming meetups plan to cover everything from alternative financial services in China to the impact of FinTech on regional / community banking.
• MIT FinTech: Launched by the Martin Trust Center for MIT Entrepreneurship and several Sloan students a few years back, MIT FinTech brings together a community of students and academics from around the university to learn and collaborate on financial technology innovation. Representative initiatives include the first graduate-level academic course on financial technology innovation, projects like the Digital Currency Initiative at the Media Lab, and events like an annual FinTech conference (coming up this weekend) and FinTech Hackathon.
• Corporate Innovation Labs: Not to be left out, the major financial institutions of Boston have also played an essential role in the development of the FinTech community — not only by leading internal innovation projects but also by providing sponsorship, commercial opportunities, office space and mentoring to startups in the area. A few to mention include DCU’s FinTech Innovation Center (which is currently home to eight promising startups at its Leather District co-working space), Eastern Labs at Eastern Bank, Fidelity Labs, the Lab of Forward Thinking (LOFT) at John Hancock, Thomson Reuters Labs, and Solaria Labs at Liberty Mutual.

Across the startups and supporting ecosystem, the building blocks are clearly in place for the next wave of FinTech innovation in Boston. I look forward to following the landscape as it evolves over the next few years.

Note: Thanks to Jay Farber, David Jegen, Jim Smith and Julia Madden for input on this post.