Global venture capital funding in FinTech declines in Q3 2016

Global VC funding in FinTech declines in Q3 2016

FinTech funding fell 17 percent in Q3’16, according to the Pulse of FinTech, the quarterly report on global FinTech VC trends published by KPMG and CB Insights.

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According to the quarterly report, overall global investment in FinTech companies across both venture-backed and non-venture-backed companies totalled US$2.9 billion in Q3'16. Q3'16 saw VC-backed FinTech funding drop 17 percent to US$2.4B, while deal activity fell 12 percent to 178 deals.

Commenting on the report, Anna Scally, Partner and FinTech leader at KPMG in Ireland, said: "It is interesting to watch global FinTech trends and observe the wave of investor interest move across the world. Payments were very hot in the US and then Europe in 2015. In 2016, we are seeing significant investment in payments in Asia."

Warren Mead, Global Co-Leader of FinTech, KPMG International said: "This quarter, Asia outpaced North America in terms of FinTech funding - a major shift from historical norms. The question is whether Asia will continue to set the pace headed into 2017. With the diversity of investments and widespread support for the growth of FinTech hubs in the region, it's a very distinct possibility."

Key highlights

  • Q3'16 saw European FinTech deals fall 17 percent quarter-over-quarter as FinTech funding in Europe dropped 43 percent over the same time period to US$233M. Germany outpaced the UK in terms of FinTech funding for the second consecutive quarter, with 35 percent more funding raised by German-based VC-backed FinTech companies than those in the UK.
  • Asia-based FinTech investment for 2016 could top last year's peak investment results, year-to-date results suggest. While the number of VC-backed FinTech deals dropped to a five-quarter low in Asia, funding increased 50 percent on a quarter-over-quarter basis to reach US$1.2B.
  • Funding in Q3'16 to VC-backed FinTech companies in North America fell 68 percent compared to the same quarter last year, which saw US$100M+ financings to the likes of Sofi, Avant and Kabbage.
  • Global FinTech mega-rounds fell to a new low in Q3'16. Asia saw US$50M+ FinTech rounds stay level for the fourth consecutive quarter, while Europe has not registered a single US$50M+ round to a VC-backed FinTech company so far in 2016.
  • The median late-stage deal size in FinTech globally fell to US$23M in Q3'16. This is significantly smaller than the same quarter last year, when median late-stage FinTech deal size hit US$50.2M globally.
  • VC-backed global FinTech deal activity fell for the second consecutive quarter, marking its lowest level since Q2'14. At the current run rate, total annual deals are projected to drop from 2015's peak high.
  • Corporates participated in 30 percent of global VC-backed FinTech deals for the second consecutive quarter in Q3'16, driving a significant amount of FinTech deals activity globally. Citigroup, Banco Santander and Goldman Sachs have made over 20+ FinTech investments in total over the past five quarters, while a host of insurers have launched corporate venture arms.

"FinTech funding is down this quarter, but it in no way reflects a lack of interest among investors, particularly corporates who see FinTech as a way to leapfrog ahead of the competition. In Q3'16, corporate venture capital participation in global deals to VC-backed FinTech companies reached 30 percent for the second consecutive quarter," says Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network and Partner, KPMG in the US. "This interest will continue to grow as corporates are looking to take advantage of the opportunities FinTech provides."

ENDS

For more information, contact:

Paul Gray
Communications Manager, KPMG Ireland
paul.gray@kpmg.ie; (01)700 4728

About KPMG in Ireland

KPMG in Ireland employs 2,400 people across its audit, tax and advisory services from offices in Dublin, Belfast, Cork and Galway. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. Anna Scally leads KPMG Ireland's FinTech practice.

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax, and Advisory services. We operate in 155 countries and have 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
 

About CB Insights

CB Insights, backed by Pilot Growth Equity and the National Science Foundation, is a software-as-a-service company that uses data science, machine learning, and predictive analytics to help our customers predict what's next: their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire. The world's leading global corporations including the likes of Cisco, Salesforce, Castrol, and Gartner as well as top tier VCs including NEA, Upfront Ventures, RRE, and FirstMark Capital rely on CB Insights to make decisions based on data, not decibels.

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