Driven by robust Venture Capital (VC) funding, an increase in deal value, and strong performance by the Private Equity sector, investments in U.S. fintech companies nearly doubled during Q3 ’17 to $5 billion, up from $2.6 billion in Q2 ’17, according to KPMG’s Q3 ‘17 Pulse of Fintech report.
For the second straight quarter, investment in U.S. fintech rose and deal activity remained robust at 142 deals this quarter compared to 125 deals in Q3 ’16 and 147 last quarter.
Globally, fintech investment in Q3 ’17 was strong at $8.2 billion, after more than doubling to $9.3 billion in Q2 ’17. Although deal volume declined, Q3 ’17 investment stood well above the $6.3 billion raised in Q3 ’16. Despite the decrease, fintech investment remained strong for the quarter, with positive investor sentiment across the Americas, Asia and Europe.
The full report can be found at: www.kpmg.com/us/the-pulse-of-fintech/media.
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The VC segment for Fintech in the U.S. remains quite robust. While deal value has slid gently in Q3, valuations are up across the board for fintech companies with later stage valuations seeing their first upward turn since a decline that began in 2015.
Exits also remain strong with the year-to-date sum of exit value already matching the full year results for 2015 and 2016.
Further, fintech activity remains geographically diversified. While the traditional strongholds of California and the Mid-Atlantic continue to attract the majority of investment, the top deals in the United States span such diverse states as Texas, Georgia, and Pennsylvania.
“We see a lot of optimism in the U.S. Fintech market – from the maturation and adoption of early stage technologies like Big Data, Artificial Intelligence and IoT to the rapid acceleration of others, such as Insurtech, Robo-advisory, Blockchain and Regtech,” said Anthony Rjeily, leader for Financial Services’ Digital and Fintech practice in the U.S. “Looking ahead, the fintech sector is expected to evolve rapidly, including both mature fintechs and large technology players diversifying into adjacent services.”
A significant number of large deals drove fintech investment in Q3 ’17. The U.S. accounted for half of the biggest deals, including: Intacct, (M&A deal at $850 million), CardConnect (Private/Public M&A at $750 million) and Xactly (Secondary buyout at $564 million). However, year-to-date median deal size for late stage deals dropped dramatically compared to 2016, to $11 million from $23.5 million.
“The focus investors have placed on finding companies with strong business models and well-defined paths to profitability has led them to be smarter and more prepared for their funding requests,” said Brian Hughes, National Co-Lead Partner, KPMG U.S. Venture Capital Practice, “As a result, while fewer companies have obtained funding, they are of higher quality than in the past.”
Other Key Findings in the U.S.:
Trends to Watch:
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the independent U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s independent member firms have 189,000 professionals, including more than 9,000 partners, in 152 countries.