the 2016 vc fintech investment landscape€¦ · the 2016 vc fintech investment landscape...

THE 2016 VC FINTECH INVESTMENT LANDSCAPEFebruary 2017

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SUMMARY

GLOBAL

UK

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08

17

ANALYST SUPPLEMENT

APPENDIX

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31

CONTENTS

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SUMMARY

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| 4Source: Pitchbook (as at 30/01/17)

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THE 2016 VC FINTECH INVESTMENT LANDSCAPE – SUMMARY (1 of 3)

5Source: Pitchbook (as at 30/01/17)

Lawrence WintermeyerCEO – Innovate Finance

China and the US dominate FinTech investment with a combined $13.9 billion of the total $17.4 billion, 80% of the global venture capital raised in 2016, and the top two ranked future foreign investment sources for UK FinTech. Whilst UK FinTech venture investment is down 33.7% in 2016 at $783 million, largely attributed to the uncertainty of Brexit and geo political / macro economic factors, Q3 funding rebounded, and 9 of the top 20 deals completed in the 6 months following the referendum, with the UK retaining its global ranking in third place. The top three UK deals were Starling Bank (challenger bank) at $101.0 million, iwoca (alternative finance) at $57.0 million and Nutmeg (robo advice) at $52.2 million

The loss of passporting rights will hit FinTech payments firms if special provisions to the single market are not negotiated upon leaving the union. However, maintaining and further improving access to global FinTech talent has superseded passportingacross the FinTech community’s post-Brexit priorities. Over 30% of Innovate Finance FinTech founders and CxOs are non-British with many employing European staff. Attracting further investment to UK FinTech remains the number one priority

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§ 2016 saw 1,436 deals globally, attracting $17.4bn of VC investment, a 10.9% increase on 2015

§ China attracted the largest amount of VC investment at $7.7bn over 28 deals, an 84% increase on 2015

investment of $4.2bn, outpacing the US for the first time

§ US investment decreased in 2016 by 12.7% to $6.2bn despite being the global leader in deal volume at 650 deals

§ 3 “mega-rounds”, each over $1bn, contributed to the significant increase in 2016 VC investment into China:

§ Alipay (Ant Financial) – $4.5bn (the biggest FinTech VC round in history)§ Lufax.com – $1.2bn§ JD Finance – $1.0bn

§ The most active global investor in 2016 was the seed fund and start up accelerator 500 Startups with 39

investments

§ Accelerators Startupbootcamp and Techstars were also amongst the most active global investors, with 36 and 30

investments respectively

§ There were no notable FinTech IPOs globally in 2016. The top global exit was the Markit’s (UK) $5.5bn merger

with IHS (US)

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§ The UK attracted $783m of VC investment, down 33.7% on 2015. The UK ranked third globally in total investment

behind China and the US, and second in terms of deal volume with 173 deals

§ The UK VC investment CAGR dropped from 58% during the period of 2012-2015 to 33% during the period of

2012-2016

§ Q2 2016 investment slowed dramatically compared to Q2 2015, which many in the community attribute to the

general uncertainty in the run up to the Brexit referendum on 23rd June 2016

§ However, 8 of the top 20 deals closed post-Brexit, with the post-Brexit investment totaling $368m, just under half

of the total UK investment for 2016

§ Q4 also underperformed by 39% compared with same period in 2015, which many have attributed to the macro

uncertainty

§ Starling Bank, iwoca, Nutmeg, SETL and BillFront led the top 5 top UK deals in the range of $35m to $100m of

investment. Starling was the only UK FinTech to make the global top 20 deal list, with an angel round of $101m

§ The 3 biggest FinTech verticals for UK investment were Alternative Lending / Financing (24%), Challenger Banks

(20%), Wealth Management (10%) and Money Transfer & FX (10%)

§ 46% of investment into the UK was from non domiciled VCs, largely coming from Europe (19%) and US (18%)

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GLOBAL

8

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2,581

6,252

11,873

15,64817,355

699

1,036

1,420

1,617

1,436

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

5,000

10,000

15,000

20,000

2012 2013 2014 2015 2016

Dea

l vol

ume

Dea

l val

ue (U

SD

M)

Deal value Deal volume

9

GLOBAL FINTECH VC INVESTMENT -5 YEAR TREND

10.9%

§ 2016 has seen 1,436 deals globally attracting $17.4bn of VC investment, a 10.9% increase YoY

Deal value 5 year CAGR: 46.4% Deal volume 5 year: CAGR: 15.5%

Source: Pitchbook (as at 30/01/17)

-11.2%

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QUATERLY GLOBAL FINTECH VC -INVESTMENT (Q1 15 – Q4 16)

2,290

3,848

7,083

2,428

5,317

7,195

2,128 2,714

416 414 416

371

453

366

324

293

0

50

100

150

200

250

300

350

400

450

500

0

2,000

4,000

6,000

8,000

10,000

12,000

Q1 Q2 Q3 Q4

Dea

l vol

ume

Dea

l val

ue (U

SD

M)

2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume

132%

87%

-70%

12%

§ In 2016, global investment increased YoY in every quarter except Q3


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GLOBAL FINTECH VC DEAL VALUE2016

U.S.$6.2bn

Canada$183m

Brazil$161m

Australia$91m

India$272m

Japan$87m

China$7.7bn

Ireland$524m

Hong Kong$170m

Germany$384m

U.K.$783m

Israel$173m

≥ $500m

≥ $100m

≥ $10m $17.4 billion invested over 1,436 deals

Mexico$72m

Singapore$86m


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GLOBAL FINTECH VC DEAL VOLUME 2016

U.S.650

Mexico21

Canada37

Australia27

Singapore41

India82

China28

Ireland17

France31

Germany50

U.K.173

Israel27

≥ 50

≥ 20

≥ 5 1,436 deals in 66 countries Source: Pitchbook (as at 30/01/17)

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GLOBAL FINTECH VC INVESTMENT -TOP 10 COUNTRIES (2015 vs 2016)

650

173

82

50

41

37

31

28

27

27

764

164

69

33

36

41

36

55

32

34

United States

United Kingdom

India

Germany

Singapore

Canada

France

China

Australia

Israel

2016 2015

7,730

6,182

783

524

384

272

183

173

170

161

4,203

7,082

1,178

97

108

1,690

150

43

125

87

China

United States

United Kingdom

Ireland

Germany

India

Canada

Israel

Hong Kong

Brazil

2016 2015

Top 10 countries by deal volumeTop 10 countries by deal value ($M)

§ China, for the first time, attracted the most investment at $7.7bn over 28 deals, beating the US which attracted $6.2bn over 650 deals


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Country:

Sector: Challenger Banks

Date: 11-Jan-16

Series: Angel

Size: $101m

Country:

Sector: Alt Financing

Date: 04-Oct-16

Series: C

Size: $57m

Country:

Sector: Wealth Management

Date: 14-Nov-16

Series: D

Size: $52m

Country:

Sector: Blockchain

Date: 15-Jul-16

Series: Angel

Size: $40m

Country:

Sector: Alt Financing

Date: 14-Dec-16

Series: A

Size: $35m

Country:

Sector: Payments

Date: 26-Apr-16

Series: B

Size: $4.5bn

Country:

Sector: InsurTech

Date: 22-Feb-16

Series: Undisclosed

Size: $400m

Country:

Sector: Capital Markets

Date: 15-Jan-16

Series: Undisclosed

Size: $1.2bn

Country:

Sector: Consumer Finance

Date: 16-Jan-16

Series: A

Size: $1.0bn

Country:


Date: 31-May-16

Series: Undisclosed

Size: $400m

§ Top UK FinTech VC deals

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TOP FINTECH VC DEALS 2016§ Top global FinTech VC deals


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4,5001,200

1,013400400394

237220212180165153150150115103103101100100100100

AliPay (China)Lu.com (China)

JD Finance (China)ION Trading (Ireland)

Oscar (US)51credit.com (China)

QuarterSpot (US)Solar Mosaic (US)

PowerPlan (US)Payoneer (US)

WeLab (Hong Kong)Weidai.com (China)

Stripe (US)LendUp (US)

PaySimple (US)Zibby (US)

Kreditech (Germany)Starling Bank (UK)

LendingHome (US)DPO Group (Ireland)

Affirm (US)Betterment (US)

Most active global investors by deal volume

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GLOBAL FINTECH INVESTMENT RANKING 2016

Top global deals by deal value ($M)

§ Starling Bank was the only UK deal in the top 20 global deals. 500 startups was the most active global investor by number of investments

39

36

30

21

18

17

13

11

9

9

9

9

8

8

8

8

8

8

8

8

8

500 Startups

Techstars

Startupbootcamp

Y Combinator

FinTech Innovation Labs

Plug and Play

Digital Currency Group

Khosla Ventures

Omidyar Network

Index Ventures

Founders Fund

Accel Parters

Ribbit Capital

QED Investors

Point Nine Capital

Peter Thiel

Nyca Parters

MassChallenge

FoundersClub

Financial Solutions Lab

Fenway Summer Ventures

UK deal HQ in the UK


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§ Top UK FinTech M&A deals

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TOP FINTECH M&A DEALS 2016§ Top global FinTech M&A deals

EV: $20m

Sector: Payments

Date: 08-Jan-16

Advisor: Deloitte

Sale toMerger with

EV: $5.5bn

Sector: Data & analytics

Date: 12-Jul-16

Advisor: Multiple

EC: $174m

Sector: Enterprise Software

Date: 27-May-16

Advisor: Quayle Munro

EV: $40m


Date: 10-Jun-16

Advisor: Quayle Munro

EV: $33m

Sector: Payments

Date: 23-Dec-16

Advisor: Deloitte

Sale to Sale to Sale to

EV: $2.35bn

Sector: Payments

Date: 01-Apr-16

Advisor: Multiple

EV: $1.5bn

Sector: Payments

Date: 01-Jul-16

Advisor: BofA ML

EV: $725m


Date: 12-Sep-16

Advisor: Evercore

EV: $463m

Sector: Payments

Date: 27-Jan-16

Advisor: Unknown

Sale to Sale to Sale to Sale to

Qingdao Haili Metal One Co Ltd

Merger with

EV: $5.5bn

Sector: Data & analytics

Date: 12-Jul-16

Advisor: Multiple


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UK

17

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191 227

727

1,180

783500

63

96

160 164173

0

20

40

60

80

100

120

140

160

180

200

0

200

400

600

800

1,000

1,200

1,400

1,600

2012 2013 2014 2015 2016

Dea

l vol

ume

Dea

l val

ue (U

SD

M)

Deal value (USD M) Markit Deal volume

-33.7%

5.5%

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UK FINTECH VC INVESTMENT -5 YEAR TREND

Deal value 5 year CAGR: 32.6% Deal volume 5 year: CAGR: 22.4%

§ 2016 UK VC investment by deal value was down 33.7% at $783m vs $1.2bn in 2015


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QUATERLY UK FINTECH VC INVESTMENT (Q1 15 – Q4 16)

344 318

129

387

295

123 129

236

45

51

34

34

65

30

44

34

0

10

20

30

40

50

60

70

0

100

200

300

400

500

600

700

800

Q1 Q2 Q3 Q4

Dea

l vol

ume

Dea

l val

ue (U

SD

M)

2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume

-14%

-61%0.0%

-39%

§ In 2016, UK investment decreased YoY in every quarter except Q3


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Challenger Banks, 20%

Money Transfer & FX, 10%

Digital Currencies & Blockchain,

6%Crowdfunding,

6%

Alternative Lending / Financing,

29%

Payments, 6%

Enterprise Software,

5%

Wealth Management,

10%

Capital Markets,

2%

RegTech, 3%

Financial inclusion,

3% Cyber security,

2%

§ Alternative Lending / Financing remains the top trend in 2016

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UK FINTECH VC DEALS BY VERTICAL -(2015 vs 2016)

UK VC investment by vertical - 2015 vs 2016

(% deal value)

2016 UK VC investment by vertical

(% deal value)


Top trends

29%

20%

10%

10%

6%

6%

6%

5%

3%

3%

2%

2%

0%

34%

12%

25%

12%

0%

4%

4%

1%

0%

0%

5%

1%

2%

Alternative Lending / Financing

Challenger Banks

Money Transfer & FX

Wealth Management

Digital Currencies & Blockchain

Crowdfunding

Payments

Enterprise Software

RegTech

Financial inclusion

Capital Markets

Cyber security

Data & Analytics

2016 2015

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Most active UK investors by deal number

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UK FINTECH INVESTMENT RANKING -2016

Top UK deals by deal value ($M)

§ There were 9 Innovate Finance members within the top 20 UK deals. Techstars & FinTech Innovation Lab were the UK’s top investors

101.057.0

52.239.5

35.031.9

28.928.5

26.025.0

22.617.3

14.013.413.313.313.0

10.510.010.0

Starling Bank

iwoca

Nutmeg

SETL

BillFront

Tandem

Sonovate

Ezbob

TransferWise

LendInvest

Property Partner

Sonovate

Digital Shadows

Azimo

OpenGamma

Flypay

GoCardless

Crowdcube

WeSwap.com

Payleven

8

8

7

6

5

5

5

4

3

3

3

Techstars

FinTech Innovation Lab

Startupbootcamp

Entrepreneur First

Passion Capital

Octopus Labs

Balderton Capital

Global Founders Capital

Seedcamp

Index Ventures

Dawn Capital

Innovate Finance member


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10.0

39.5

10.5

57.0

13.3 13.317.3

52.2

35.0

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UK FINTECH VC INVESTMENT -POST BREXIT ROUNDS§ 9 of the Top 20 UK deals closed post Brexit, with total post Brexit investment of $368m

Source: Pitchbook (as at 30/01/17) Note: The Brexit vote was on the 23rd June 2016

Date Jul-16 Jul-16 Aug-16 Oct-16 Oct-16 Oct-16 Oct-16 Nov-16 Dec-16

Series B Angel n/a C D A B D A

VerticalMoney

Transfer & FX

Blockchain Crowd-funding

Alt Lending / Financing

RegTech Payments Alt Lending / Financing

WealthManagement

Alt Lending / Financing

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UK FINTECH INVESTOR HQ LOCATIONS (2015 & 2016)§ 46% of investment into the UK was from non domiciled VCs, down from 53% in 2015. 2016

investment outside of the UK was largely from Europe (19%) and US (18%)

* United states includes BermudaSource: Pitchbook (as at 30/01/17)

United States*,

18%

United Kingdom,

54%

Europe, 19%

Asia, 3%

Middle East, 1%

Other, 1% Unknown,

4%

UK FinTech Investor HQ Locations - 2015 vs 20162016 UK FinTech Investor HQ Locations

54%

18%

19%

3%

1%

1%

4%

47%

25%

16%

5%

3%

1%

3%

United Kingdom

United States*

Europe

Asia

Middle East

Other

Unknown

2016 2015

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UK FINTECH VERTICAL ANALYSIS -5 YEAR TREND§ The top five verticals in the UK have seen reduced deal size in 2016 in comparison with 2015

7344

9 24 1759 51

28 21 23

158

219

130

1539

395

48

298

55

138

230

4577

12

78

0

50

100

150

200

250

300

350

400

450

Alternative Lending / Financing

Payments Money Transfer & FX Capital Markets Wealth Management

Dea

l val

ue (U

SD

M)

4 8 710 10 6 1329 46 36 43823 42

145

1143 43

158

38

050

100150200250300350400450

Data & Analytics* Digital currencies & blockchain

Crowdfunding Challenger banks Enterprise software

Dea

l val

ue (U

SD

M)

2012 2013 2014 2015 2016

Source: Pitchbook (as at 30/01/17) *Data & Analytics figures exclude Markit VC round of $500m in 2013

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Notes: 1) Includes Barclays / Techstars, Startupbootcamp and FinTech Innovation Lab2) % represent number of cohort companies in a vertical compared with the total cohort companies in that year

UK ACCELORATOR FINTECH COHORT -TREND ANALYSIS (2014 – 2016)

2014

RegTech25%

Digital Currencies and Blockchain17%

Wealth Management17%

Enterprise software24%

Data & Analytics24%

Digital Currencies and Blockchain18%

Payments17%

Data & Analytics17%

2015 2016

§ RegTech was the most common vertical in 2016, with Digital Currencies and Blockchain the top verticals in both 2015 and 2016

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UK EQUITY CROWDFUNDING FINTECH INVESTMENT 2016

Equity crowdingfunding investment by FinTech verticalKey statistics

Note: Includes Crowdcube, Angels Den, Envestors, SyndicateRoom, SeedrsSource:

§ UK equity crowdfunding investment into FinTechs totaled $37.9M in 2016, with 45% invested into crowdfunding platforms

Crowdfunding Platforms,

45%

Wealth Management,

22%

Money Transfer & FX, 14%

Challenger Banks, 13%

Digital Currencies &

Blockchain, 4%

Capital Markets,

1%Data &

Analytics, 1% InsurTech,

1%FinTech deal value $37.9M

FinTech deal volume 18

Average % raised vs goals(FinTech

Companies)

140%

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ANALYST SUPPLEMENT

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2016 GLOBAL VC FINTECH INVESTMENT LANDSCAPE – ANALYST SUPPLEMENT


Investors

§ The most active FinTech investor in 2016 was the seed fund and start up accelerator 500 Startups with 39

investments. In June 2016, 500 Startups announced it was raising a $25m FinTech fund to invest in ~100 early

stage companies globally

§ Accelerators Startupbootcamp (UK based) and Techstars (US based) were also amongst the most active global

investors, with 36 and 30 investments respectively. Startupbootcamp has FinTech accelerators in London,

Mumbai, New York and Singapore. Techstars has partnered with Barclays and has FinTech accelerators in New

York, London and in 2016 launched programs in Tel Aviv and Cape Town

Exits

§ In contrast to 2015, which saw two large FinTech IPOs (Square and Worldpay), 2016 did not see any notable

FinTech companies IPO, with several companies postponing them (e.g. SoFi, Elevate Credit Inc.)

§ 2016 Exits were realised through M&A via trade or private equity. The largest exit was UK based data & analytics

company Markit’s merger with US based IHS for $5.5bn

§ FinTech M&A activity is likely to increase in 2017 as the number of mature FinTech companies in the market

increases

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2016 UK VC FINTECH INVESTMENT LANDSCAPE – ANALYST SUPPLEMENT


Investors

§ The top investors in the UK were Techstars and FinTech Innovation Labs – both US domiciled accelerators with

specific London FinTech cohorts

§ 46% of investment into the UK was from investors not domiciled in the UK, the largest of these being Europe at

19% and the US at 18%. Within Europe, large amount of investment from France and Germany – other notable

FinTech hubs

UK accelerators

§ 25% of the London FinTech accelerator cohorts in 2016 were RegTech companies, supporting the prediction that

RegTech will emerge as an important FinTech vertical in 2017

§ Blockchain is also a top vertical (17% of the cohorts in both 2015 & 2016), indicating that this technology is still

receiving investment and development attention on the path to wider industry application and adoption

Equity crowdfunding

§ Equity crowdfunding is performing not only as a strong and stable asset class in its own right, but also a growing

vertical in the alternative finance industry

§ $37.9m was raised by FinTechs across platforms in 2016, with crowdfunding platforms raising 45% of the total

FinTech investment through platforms. As the sector matures, we are more than likely to see other verticals

seeking to capitalise on this new fundraising method

| 30

For the full speaker list go to www.ifgs2017.com

Rajesh AgrawalDeputy Mayor of

London for Business

Maria GotschPresident and CEO of the

Partnership Fund for New York City

Giles AndrewsCo-Founder & Executive

Chairman, Zopa

Ian DysonCommisoner

City of London Police

Steel Mohnot Partner, 500 Startups

Céline LazorthesFounder and CEO

Leetchi & MANGOPAY

Brett KingCEO of Moven and Host of

Breaking Banks

Jens SpahnParliamentary State

Secretary Federal Ministry of Finance, Germany

2000+ ATTENDEES300+ FINTECHS100+ SPEAKERS

Platinum Sponsor Lead Media Partner

10th - 11th April 2017

Guildhall, London

Tickets available now at £795

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APPENDIX

31

|32

APPENDIX I: VERTICAL DEFINITIONS

§ Alternative Lending / Financing – P2P lending, invoice financing, SME financing, e-lending platforms, credit scoring

§ Capital Markets – innovation relating to primary issuance, securities trading, M&A, trade and advisory services in a B2B

§ Challenger Banks – new digital banks that are challenging the large established High Street banks

§ Crowdfunding – platforms that allow investment for projects / companies / property

§ Cyber Security - technology designed to protect companies infrastructure from attack, damage or unauthorised access

§ Data & Analytics – analysis of data within the financial industry to support data driven decisions

§ Digital Currencies & Blockchain – digital ledger technology, in which transactions made in bitcoin or digital currency are recorded chronologically and publicly

§ Enterprise Software – software solutions for financial service industry

§ Financial Inclusion – delivery of financial services to the unbanked / unbankable

§ InsurTech – technology applied to the insurance industry

§ Money Transfer & FX – money transfer, international remittance & currency conversion

§ Payments – innovation in payments, including cashless, online / ecommerce, mobile, B2B, merchant / POS, wallets, P2P, recurring

§ RegTech – technology applied to resolve issues regarding regulation within the financial industry

§ Wealth Management – innovation within pensions, savings, personal financial management, investment platforms and management of personal assets and investments (e.g. robo-advisors)

|33

APPENDIX II: METHODOLOGY§ VC deal value figures include the deal types:

- Angel

- Accelerator / incubator

- Crowdfunding

- VC (all rounds)

- Private Equity (Growth/Expansion rounds only)

§ VC deal value figures include all deals completed or announced (verified to press releases) in 2016

§ Deal volume figures include deals without a disclosed deal value

§ UK VC deal value represents investment into FinTech companies which are Head Quartered in the UK

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END

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the 2016 vc fintech investment landscape€¦ · the 2016 vc fintech investment landscape...

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