US accounts for US$5 billion of global fintech investment, Asia exceeds US$1billion.
Total global fintech funding continues to remain strong, with US$8.2 billion invested in Q3'17, after more than doubling to US$9.3 billion in Q2., according to the KPMG Pulse of Fintech report. Although deal volume declined, Q3'17 investment stood well above the US$6.3 billion raised in Q3'16. Venture capital (VC) investment in fintech in Q3'17 saw a five quarter high of US$3.3 billion, although the total was well shy of the record US$7.4 billion raised in Q3'15.
The US led global fintech investment in Q3'17, with US$5 billion deployed across 142 deals. Europe and Asia lagged considerably behind the US, with Europe fintech deals accounting for US$1.66 billion of investment across 73 deals, and Asia accounting for US$1.21 billion across 41 deals.
Despite healthy investment activity, the volume of VC fintech deals dropped dramatically in Q3'17, particularly at the earlier deal stage. The number of angel and seed stage fintech deals plummeted to 67 for the quarter: a low not seen since Q1'13. This reflects the trend of investors focusing on larger deals and higher quality companies with proven business models.
“The fintech market continues to rapidly evolve with an increasing diversity of funding participation and sources, geographic spread and areas of interest,” says Ian Pollari, Global Co-Lead, KPMG Fintech. “We are seeing the emergence of fintech leaders who are looking to expand internationally to scale there platforms, as well as large technology giants, moving into adjacencies to create new value for their customers. This is a trend that is expected to continue and could force incumbent financial institutions to take bolder steps in response.”
While total fintech investment in the Americas dropped in Q3'17, it is important to note that Q2'17 included a significant outlier deal in the US$3.6 billion buy-out of Canada-based DH Corp.
The US drove the majority of investment in Q3'17, with US$5 billion invested, including six of the quarter's top global deals. Unlike in Europe and Asia, first time financings in the US appear to be relatively strong, with the amount invested on track to potentially exceed 2016's totals despite a drop in the number of deals. Canada also saw a significant level of direct fintech investment activity, with US$312 million invested.
Asia experienced a solid increase in fintech investment in Q3'17, with US$1.21 billion raised across 41 deals. VC funding was up considerably - accounting for just over US$1 billion in investment. China accounted for over half of Asia fintech investment at US$745 million. India investment dropped for the third straight quarter, with only US$87.7 million in VC invested.
Corporate participation in Asia fintech VC deals remained high at 22 percent of overall round counts, although actual direct investment has been quite minimal in 2017 with just US$840 million invested YTD in associated deal value.
Total fintech investment in Europe dipped in Q3'17 to US$1.66 billion, from US$2 billion in Q2. VC funding was particularly strong in Q3 at over US$700 million. Median late stage fintech deal size for the quarter sat at US$17.3 million, well above 2016's US$10.2 million. Corporate VC investment in Europe has skyrocketed compared to 2016, with a record setting US$647 million already invested with CVC participation YTD. Corporate participation in fintech VC deals is also up dramatically - from 13% in 2016 to 20% in 2017 YTD.
Germany accounted for the largest share of fintech investment this quarter buoyed by the US$806 million secondary buyout of ConCardis. The UK, meanwhile, accounted for 7 of Europe's largest deals, including US$100 million+ rounds to Prodigy Finance and Neyber.
“Investors globally are becoming more mature about their investments in fintech, even as the startups themselves mature,” explains Jonathan Lavender, Global Chairman, KPMG Enterprise. “Moving forward, we are going to see investors increasingly looking for companies to deliver value, and to demonstrate their ability to achieve results.”
*Data for the Pulse of Fintech report provided by PitchBook.
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