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U.S. VC Investment in FinTech Rises to $1.2B in Q1 2017

April 28, 2017, 07:45 AM
Filed Under: Economic Commentary

U.S. venture capital (VC) investment in fintech companies rose to $1.2 billion in Q1’17, driven by late-stage deals, which reached the highest activity since Q1’16, according to KPMG International’s Q1 2017 The Pulse of Fintech report. Non-VC fintech investment in the U.S. reached $300 million in Q1’17, leading to a total of $1.5 billion in fintech investment in the U.S. for this quarter.

“The U.S. leads the rest of the world in the total value of fintech investment due to the large amount of funds available to invest in the market, with investors focusing on late-stage, clear front-runner fintech companies,” said Anthony Rjeily, KPMG’s U.S. Financial Services Fintech Practice Co-Leader.

Despite a strong quarter in the U.S., global fintech investment got off to a soft start in Q1’17, with total global investments at $3.2 billion, down from $4.15 billion in Q4’16. Global fintech M&A dropped in Q1’17, with $920 million in deal volume, down from $1.8 billion in the previous quarter, and less than half of the $4 billion in funding in Q1’16. Fintech M&A in the United States is off to a slow start, $200 million across 24 deals reported this quarter. Global venture capital funding to fintechs held relatively steady at $2.3 billion in Q1’17.

The global market is seeing an increase in the breadth of fintech technologies and applications.

“Payments and lending continue to attract the most funding globally, although we’re seeing increasing interest in a variety of technologies,” said Brian Hughes, Co-Leader, KPMG Enterprise Innovative Startups Network, and National Co-Lead Partner, KPMG Venture Capital Practice in the U.S. “In addition to continued growth in regtech and insurtech, areas such as artificial intelligence, machine learning and Internet of Things are gaining increasing investor attention.”

Ann Armstrong, KPMG’s U.S. National Fintech Co-Leader, said, “Corporations are looking into making fintech investments that can be integrated into their long-term strategies. There is a renewed focus on performance over potential, and alignment with the corporation’s overall objectives.”

Private Equity (PE) firms, including those that are not technology-focused, are making inroads in the late-stage fintech arena with a robust sum of $1.2 billion in total PE deal value in Q1’17 across 11 deals. The largest concentration of U.S. fintech investment remains on the West Coast with 67.6 percent of the total value of deals and 39 percent of the total number of deals. However, fintechs have succeeded in growing outside of Silicon Valley, with companies based in Delaware and Ohio making the top deals list.

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