U.S. Fintech Funding and Deal Volume Continue to Fall in Q3: KPMG & CB Insights Report

NEW YORK, Nov. 16, 2016 /PRNewswire/ -- For the second straight quarter, U.S. venture capital (VC) investment in fintech companies declined in Q3'16. According to the Pulse of Fintech, the quarterly global report on fintech VC trends published jointly by KPMG International and CB Insights, U.S. fintech startups saw funding total $800M in Q3'16, a decrease of 50% from Q2'16, while deal activity experienced a 5-quarter low with 88 deals recorded.

"Given investors had to contend with market uncertainties related to the outcome of the U.S. presidential election and the timing of the interest rate increase, it's not surprising that investors held back from making large deals," said Anthony Rjeily, KPMG's U.S. Financial Services Digital leader and Fintech practice co-leader. "However, there is growing enthusiasm related to M&A, IPOs and liquidity, and expectations are that while Q4 may be relatively lackluster, 2017 should see fintech gaining momentum again."

KPMG International and CB Insights will discuss the Q3'16 Pulse of Fintech report, investment trends and key players in fintech during a live webinar at 11 a.m. EST, December 8, 2016. Register at https://www.cbinsights.com/research-webinar-fintech-q3-2016

Corporate VCs in North America Remain Strong Players in Fintech in Q3'16

Corporate VCs in North America participated in over 25% of total fintech deals, primarily due to interest in fintech as a strategic play, and more broadly based on its potential for strong financial returns. The Internet of Things, artificial intelligence and Big Data are becoming increasingly more attractive, but capital limitations call for corporates to consider strategic alignments and the potential value of fintech solutions up front.

"One challenge among corporate VCs is that while there is a keen desire to make use of Fintech, there are numerous innovations vying for their attention," said Brian Hughes, National Co-Lead Partner, KPMG LLP's Venture Capital Practice. "Many corporates want to take advantage of Fintech but they have so many issues they need to address."

Investors looking for blockchain and InsurTech

Blockchain — or distributed ledger technology — has received a significant amount of attention from U.S. VC investors. Many of the large U.S. financial institutions have invested in blockchain-related companies, announced partnerships to examine blockchain's potential or moved ahead with proof-of-concept activities. Other large corporates are also taking a closer look at blockchain, and therefore interest is expected to grow over the next quarter.

Similarly, there was a dramatic increase in interest in InsurTech in Q3'16 and the trend is expected to continue. The U.S. was the top country in Q3'16 with 10 InsurTech deals, valued at $104.7 million in total.

Other Key Findings:

• Seed deal share recovered to 34 percent in Q3'16, after falling to 22 percent of all U.S. VC-backed fintech deals in Q2'16. Series A deal share fell to 17 percent, a 5-quarter low for U.S. VC-backed fintech deals.
• The top 10 North American fintech deals in Q3'16 totaled $430 million in total funding. Deals include Avalara, MetroMile, and GreenSky.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 174,000 professionals, including more than 9,000 partners, in 155 countries.

About KPMG International

KPMG is a global network of professional services firms providing Audit, Tax, and Advisory services. We operate in 155 countries and have 174,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

About CB Insights

CB Insights, backed by RSTP and the National Science Foundation, is a software-as-a-service company that uses data science, machine learning, and predictive analytics to help customers predict what's next — their next investment, the next market they should attack, the next move of their competitor, their next customer, or the next company they should acquire.

SOURCE KPMG LLP

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