Despite the decline investment in fintech is on pace to exceed 2015 results. Also, Asia saw a five quarter high in deals
Amid a tougher climate for marketplace lenders and a drop in mega-round activity, investment to VC-backed fintech startups fell 49% according to KMG and CB Insights report. Despite this decline, VC investment in fintech is on pace to exceed 2015 results.
According to the new report, overall global investment in fintech companies across both venture-backed and non-venture-backed companies totaled USD 9.4 billion in Q2’16, buoyed by Ant Financial’s USD 4.5 billion financing. VC-backed fintech companies raise USD 2.5 billion across 195 deals in Q2, a 12% drop in deal volume compared to Q1’16.
Key highlights from The Pulse of Fintech report:
- Q2’16 saw mega-round activity fall to a five-quarter low. Europe had zero venture capital-backed USD 50 million+ fintech funding rounds, while North America saw USD 50 million+ fintech funding rounds fall to five rounds from 13 in the same quarter last year.
- Despite a large funding drop in Q2’16, funding and deal activity to VC-backed fintech companies in the first 6 months of 2016 are on pace to hit USD 14.8 billion across more than 820 deals by the end of 2016 at the current run rate, both of which would register as record highs.
- The 30 largest fintech funding rounds during the first half of 2016 totaled over USD 4.6 billion in aggregate funding. North America accounted for 19 of these rounds, while Asia accounted for eight rounds.
- Corporate investors participated in nearly one of every three deals to VC-backed fintech companies in Q2’16, compared to just 23% in Q2’15.
Asia fintech deals hit five-quarter high; funding returns to earth
Asia saw VC-backed fintech companies raise USD 0.8 billion across 46 deals in Q2’16 – a funding decline of 71% from Q1’16 primarily due to the lack of major mega-rounds. Q1’16 included two USD 1 billion+ mega-rounds in China. Deal activity to VC-backed fintech companies in Asia reached a five-quarter high in Q2’16 with 46 deals recorded.
North America sees fintech funding, deals dip in Q2’16
North America saw both fintech funding and deals fall on a quarter-over-quarter basis, as VC-backed startups raised USD 1.3 billion across 97 deals, a drop of 25% in the number of deals compared to Q1’16.
Q2’16 funding to VC-backed fintech companies in North America fell 28% on a quarter- over- quarter basis and 48% compared to the same quarter last year.
Europe fintech funding rises slightly
Europe saw VC-backed fintech funding lift to a three-quarter high in Q2’16, rising 22 percent on a quarter- over -quarter basis to hit USD 369 million across 43 deals. As the UK continues to deal with the ramifications of Brexit, Q2’16 saw Germany outpace the UK for VC-backed fintech funding by 80%.
The rise of InsurTech
InsurTech is coming into its own as an area of fintech for venture capital investment, hitting USD 1 billion across 47 deals in the first half of 2016. Health insurance-related startups claimed the three largest deals of 2016 YTD, but startups across P&C and life insurance are also seeing an increasing amount of investment.
Banks continue to stay active in fintech investing
Over the last five quarters, Goldman Sachs, Citigroup and Banco Santander or their venture arms (excludes 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.