KPMG and CB Insights release their latest quarterly fintech venture capital (VC) report, highlighting a rebound in funding and deals.
After a significant pullback in funding in Q4’15, mega-rounds lifted quarterly investment into VC-backed fintech companies by over 150 percent, according to The Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights.
According to the new report, global investment in private fintech companies totaled US$5.7 billion in Q1’16, with US$4.9 billion specifically invested in VC-backed fintech companies across 218 deals, a 96 percent jump compared to the same quarter last year. The rise in funding was tempered by the fact that three mega-rounds accounted for 54 percent of VC fintech investment in Q1’16. On a quarter-over-quarter basis, VC-backed fintech deal activity rose 22 percent in Q1’16.
KPMG International and CB Insights will discuss findings from The Pulse of Fintech report, investment trends and key players in fintech during a live webinar on 31 May 2016 at 11:00am EDT. Register here.
“Global VC investment into the technology sector may be experiencing a bit of a pause, however fintech, propelled by some very large mega-rounds, has proven to be an exception to the rule,” said Warren Mead, Global Co-Leader of Fintech, KPMG International. “Investors are putting money into fintech companies all over the world – from the traditional strongholds of China, the US and the UK – to up and coming fintech hubs like Singapore, Australia and Ireland.”
Anand Sanwal, CEO at CB Insights, added: “While fintech startups continue to attract large investment both in the US and abroad, and investors gravitate to areas yet untouched by much tech innovation including insurance, recent events and public market performance suggest that growth-stage fintech fundraising will be harder to come by moving forward in 2016."
Key highlights from The Pulse of Fintech:
North America sees funding bounce back
North America saw both fintech funding and deals rebound following a major drop in Q4’15, as VC-backed fintech companies raised US$1.8 billion across 128 deals, an increase of 80 percent in funding quarter-over-quarter.
Deal activity to VC-backed fintech companies in North America is on pace to reach a new high in 2016 at the current run rate, as the 128 fintech deals registered over the three-month period was the largest quarterly total since Q2’15.
Chinese mega-rounds propel Asia fintech funding
Following a drop off in Q4’15, fintech investment in Asia reversed course in Q1’16 to hit a new high of US$2.6 billion.
China accounted for US$2.4 billion of Asia fintech funding and 49 percent of fintech funding across all geographies, primarily as a result of US$1 billion+ funding rounds to JD Finance and Lu.com.
Europe fintech deals rise; no spike in funding
Europe saw VC-backed fintech deals reach a five-quarter high, rising from 37 in Q4’15 to 47 in Q1’16. Europe fintech funding remained almost level with Q4’15’s total at US$0.3 billion. UK funding rounds to WorldRemit and LendInvest pushed UK funding to account for over half of Europe’s fintech funding total.
CB Insights’ Sanwal commented: “Fintech investment in Europe has certainly been less overheated than in other markets, which has resulted in an increasing appetite for fintech investments in the region by cross-border investors both from the US and Asia."
Corporates participate in over 20 percent of deals for fifth straight quarter
Corporate investors continue to play a large role in the fintech ecosystem, with global deals to VC-backed fintech companies standing at 24 percent+ in three of the past five quarters. Of note, Europe saw an upswing in corporate fintech investment during Q1’16 as corporate participation in deals to VC-backed fintech companies rose from 8 percent in Q4’15 to 21 percent in Q1’16.
Brian Hughes, Co-Leader, KPMG Private Enterprise Innovative Startups Network and Partner, KPMG in the US said: “Q1’16 was a strong quarter for venture capital investment in the fintech sector, characterized by 13, US$50 million+ rounds to VC-backed companies globally, including billion-dollar rounds by Lu.com and JD Finance. However, recent challenges at several high profile, publicly-traded fintech companies, may well dampen private investor enthusiasm moving into Q2.”
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KPMG’s Financial Services practice has launched the global fintech practice in order to leverage international investment activity and capability development in fintech across KPMG member firms. Warren Mead and Ian Pollari, partners with KPMG in the UK and KPMG in Australia respectively, have been appointed as global co-leads of the practice, along with a leadership team including partners from countries including the US, UK, Israel, China & Hong Kong, India and Australia.
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.
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. 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.
The views and opinions expressed herein are the personal opinions of the interviewees and authors based on their personal experience working as Auditors in the industry and do not necessarily represent the views or opinions of KPMG International or any KPMG member firm.