U.S. Fintech Investment Rebounds To $2 Billion In Q2' 17, Driven By Stronger Venture Capital Funding: KPMG Report

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"The U.S. continues to lead the way in fintech investment and the future looks bright -- especially long term -- as the startups shift their thinking, and expand their geographic reach and their core capabilities," said Anthony Rjeily, leader for Financial Services' Digital and Fintech practice in the U.S. "However, in the short term there could be caution as a result of macroeconomic issues and the expectation of rising interest rates."

Total global fintech investment more than doubled quarter over quarter to $8.4 billion across 293 deals, up from $3.6 billion in Q1'17. Global VC funding remained solid with $2.5 billion invested across 227 deals.

To access the full report, please visit: https://home.kpmg.com/us/en/home/insights/2016/03/global-analysis-of-venture-funding.html.

The Americas region led in fintech funding for the quarter, lifted by the $3.6 billion buyout of Toronto-based payments company DH by US-based Vista Equity Partners. The deal is the largest takeover of a Canadian company by a foreign firm since 2014.

Excluding the DH deal, the U.S. continued to lead the pace in the Americas with five of the top 10 fintech deals globally – AvidXchange ($300 million), Bright Health ($160 million), Pos Portal ($158 million), Fast Match ($153 million) and Addepar ($140 million). Strong private equity (PE) and VC investment helped drive the fintech funding increase in the U.S., with VC investment rising to over $1.5 billion across 104 deals. 

"Early on the focus of many fintech startups was geared towards enhancing the customer experience but now we are also seeing them turn their attention to automating mid-and-back office banking applications," said Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network, and National Co-Lead Partner, KPMG Venture Capital Practice, KPMG in the U.S. "In addition to this shift we also expect to see increased investment in blockchain, insurtech, and regtech over the next few quarters."

Other Key Findings in the U.S.:

• Corporate participation jumps significantly. In the quarter, overall deal count with corporate participation in fintech-focused VC deals increased to nearly 21 percent in Q2'17 from 14 percent in Q1'17.
• Angel and seed-stage deals continue to decline. Q2'17 saw a continued decline in angel and seed-stage fintech deals, with just 36 deals compared to a peak of 75 in Q1'15.
• Wealth management was a hot area of investment in Q2'17.  Robinhood and Addepar raised $100 million + funding rounds.
• Fintech M&A activity in the U.S. continued to be weak during the quarter, potentially the result of the cyclical nature of the M&A market.

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SOURCE KPMG LLP

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