Fintech Deal Activity Plummets In Q2: KPMG & CB Insights Report

Fintech Deal Activity Plummets in Q2’16

Health and life insurance sectors see increased investment; Corporates and banks help keep things afloat

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Amid a tougher climate for marketplace lenders and a drop in mega-round activity, investment in VC-backed fintech companies fell 24 percent in the U.S and nearly 50 percent globally during Q2 ‘16, according to the Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights.


U.S. fintech companies saw funding of $1.3 billion in Q2’16, down from $1.7 billion in Q1’16 and from $2.4 billion in Q2’15. Deal activity to VC-backed fintech companies in the U.S. also experienced a five quarter low with just 90 deals.


“While investment in VC- backed fintech companies decreased over the past quarter, we are encouraged by the momentum that is building in underinvested areas such as InsurTech, healthcare, banking and blockchain,” said Anthony Rjeily, KPMG’s Financial Services Digital and Fintech practice leader. “In addition, over the past year we’ve seen large financial institutions shift their thinking from skepticism to active engagement.”


KPMG International and CB Insights will discuss findings from the Pulse of Fintech report during a live webinar on September 1, 2016 at 11:00am EDT. Register at https://www.cbinsights.com/research-webinar-fintech-may2016.


The rise of InsurTech

InsurTech is coming into its own as an area of fintech for venture capital investment, hitting $1 billion across 47 deals in the first half of 2016. Health insurance-related companies claimed the three largest deals of 2016 to date, but companies in life insurance are also seeing an increasing amount of investment.


Corporates and Banks continue to stay active

Corporates played a larger role in deals to North American VC-backed fintech companies in Q2’16, participating in 30 percent of all fintech deal activity, up from 23 percent last quarter. Over the last five quarters, Goldman Sachs, Citigroup and Banco Santander or their venture arms (excluding independent VC firms associated with these banks) have invested in 25 VC-backed fintech companies. Other banks making investments globally across the fintech landscape include HSBC, JPMorgan Chase, and Mitsubishi UFJ Financial Group.


"We are seeing more partnering with fintechs by traditional financial services companies to help develop new business models, while also enabling fintechs to expand their customer base and get the support they need to become sustainable," said Brian Hughes, National Co-Lead Partner, KPMG LLP’s Venture Capital Practice. “VC investment in fintech is still very positive, but the past quarter certainly reflects a more cautious environment.”


Other key findings:

  • The 30 largest fintech funding rounds during the first half of 2016 totaled over $4.6 billion in aggregate funding. North America accounted for 19 of these rounds.
  • Fintech early stage deal share in the U.S. fell to a five quarter low in Q2.
  • Seed deal share fell to 21 percent after taking almost one-third of all U.S. VC-backed fintech deals in Q1.

About KPMG Internartional

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 RSTP 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.

Contacts:

Andreas Marathovouniotis
KPMG LLP
201-307-7608
917-957-1174 (c)
amarathovouniotis@kpmg.com


Brandon Hatler
KPMG LLP
201-307-8637
201-638-5263 (c)
bhatler@kpmg.com

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