The State Of Fintech Funding, In Five Charts

  • Overall VC funding is down as firms increase investments in late-stage deals and seed funding slows

  • Private equity, corporate VCs emerge as alternative financing sources

Investment in financial technology may have fallen a spectacular 47 percent last year but it is perhaps just an indication of the maturation of the industry.

Total global funding to fintech companies fell to 47.2 percent to $24.7 billion in 2016 from $46.7 billion the year before, according to KPMG’s quarterly fintech funding report, The Pulse of Fintech, which came out in February 23. Deal activity dropped to 1,076 from 1,255 the year before.

“The appetite for fintech investment is strong and will remain so for the foreseeable future,” said Steven Ehrlich, lead analyst for emerging technologies at Spitzberg Partners. “However, things are certainly not as frothy as they used to be, especially for the early stage companies.”

That’s largely due to investors’ renewed focus on business models and plans for profitability, Ehrich said. And as always, regulation. “Startups are realizing that they cannot skirt those requirements and financial institutions are working to make sure that everyone is playing by the same set of rules.”

Below is a breakdown of who’s funding fintech activity on a global level today.

VC deal volume is down, but dollar value keeps growing

The number of venture capital deals fell to 1,436 last year from 1,617 in 2015. However, those deals continued to increase in value, rising to $17.35 billion globally in VC investment from $15.64 billion the year before.

Chris Hughes, vice president at Revolution, a venture capital firm that invests in growth-stage companies, said growth slowed following 2014 and 2015 markets, two fast growing years for fintech VC funding, when the industry’s most exciting companies, marketplace lenders Lending Club and OnDeck, had trouble growing and reaching profitability. As a result, “public market investors started to reprice these companies based on their performance relative to their traditional peers and monitor metrics like net interest margin, return on equity and profitability,” he said.

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