Following a ‘significant pullback’ in the final quarter of 2015, fintech funding in 2016 got off to a very strong start, buoyed by several massive Chinese deals.
Global investment in private fintech companies added up to $5.7 billion in the first quarter of the year, according to the Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights.
Of that $5.7 billion, $4.9 billion was invested in VC-backed fintech companies across 218 deals. This marked a 96% increase compared to the same period in 2015.
However, before we all go ahead and pop the champagne, it should be noted that the figures have been heavily influenced by several huge rounds, which accounted for 54% of VC fintech investment in Q1’16. On a quarter-over-quarter basis, VC-backed fintech deal activity rose 22% in Q1’16.
“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.”
Key takeaways from the report
Funding rebounds in North America: After a big drop in the fourth quarter of 2015, North America saw both funding and deals increase again as fintech companies, backed by VCs, managed to raise $1.8 billion across 128 deals. This is an increase of 80% in funding quarter-over-quarter. The report predicts venture capitalist deals are on track to reach record heights if they continue at the same pace.
China accounts for half of all deals in Q1: In a similar pattern to N.America of having a drop off at the end of last year, Asian deals bounced back in spectacular fashion to hit a new high of $2.6 billion. Of that figure, China accounted for $2.4 billion and 49% of ALL the deals. KPMG attributes this figure to massive $1 billion+ funding rounds of JD Finance and Lu.com.
UK to Europe is what China is to the world: The report says VC-backed deals in Europe hit a five-quarter high, though funding remained almost unchanged from the end of 2015. Funding rounds for WorldRemit and LendInvest boosted the UK to account for over half of Europe’s fintech funding total.
Brian Hughes, Co-Leader, KPMG 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, characterised by 13, US$50M plus rounds to VC-backed companies globally, including billion-dollar rounds by Lu.com and JD Finance.”
However, he also warned that the second quarter may be less rosy:
“However, recent challenges at several high profile, publicly-traded fintech companies, may well dampen private investor enthusiasm moving into Q2.”
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