Fintech VC Backing Dipped 13 Percent in 2016, Mirroring Rest of Tech
The final numbers on 2016 fintech funding deals are in from New York-based research firm and investment database CB Insights, and venture capitalists seem to be cooling on the industry.
According to a report released today, financial technology companies around the world attracted $12.7 billion in venture capital across 836 investments last year. That is down 13 percent from a peak in 2015, when global fintech investment soared to $14.6 billion.
The numbers are in rough agreement with the slowdown or “normalization” in overall venture funding activity in 2016, according to several reports.
Fintech has seen a frothy flood of new players emerge in payments, personal finance, blockchain, and lending, all looking to set off a revolution in an industry dominated by huge institutions. Such startups might hope to make a splash the way OnDeck did on the road to its $200 million IPO in 2014. These days, however, venture capitalists are not responding with their former zeal, and even OnDeck has lost market value—trading at $5.69 per share on Feb. 14, down from $24.15 per share when the company went public.
Based on the CB Insights report, 2015 was a landmark year for fintech. That was when venture-backed companies in the sector nearly doubled the $7.7 billion in funding they saw in 2014—and 2014 had brought more than double 2013’s venture funding total of $3.1 billion for fintech.
The total number of VC deals in 2016 for fintech remained largely flat, according to CB Insights—down just 1 percent year-over-year—meaning the size of the investments shrank considerably.
Based on the report, the fourth quarter of 2016 in particular saw a lapse in megadeals, with fewer venture rounds in excess of $50 million reported around the world.
The declines were not a universal mule-kick to fintech, though, as big banks Citigroup, Goldman Sachs, and Santander continued their investments in startups from the sector. Other significant backers of the fintech scene included New Enterprise Associates, 500 Startups, and General Catalyst.
Certain aspects of fintech fared better than others. Payment technology, for instance, saw its venture-backed deal values rise to $477 million in the fourth quarter of 2016, as compared with $402 million in the previous quarter. Bitcoin and blockchain technology deals, meanwhile, sank in the fourth quarter to $69 million, down from $90 million in the third quarter.
The good favor fintechs held among venture capitalists also varied across different geographies. Despite being home to 11 out of 22 “unicorn” fintech companies, the United States saw the deepest cuts in venture funding for this sector. Domestic fintech companies raised just $5.5 billion last year, down 29 percent compared with 2015. Moreover, the number of fintech venture deals in the U.S. sank to 2014 levels at 422.
In Europe, venture-backed funding for the fintech sector fell 25 percent to $1.2 billion. Fintechs in Asia, on the other hand, set a new record high with $5.4 billion in venture backing collectively raised among them—and $4.6 billion of that capital was raised by companies in China, a five-year high for the country.
Asia is also home to the fintech company with the highest valuation, according to the report: Shanghai-based finance marketplace Lufax, at $18.5 billion. The next highest valuation among fintech companies was $9.2 billion for U.S.-based Stripe.