THE 2016 VC FINTECH INVESTMENT LANDSCAPE February 2017
CONTENTS SUMMARY 03 GLOBAL 08 UK 17 ANALYST SUPPLEMENT 27 APPENDIX 31 2
SUMMARY 3
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THE 2016 VC FINTECH INVESTMENT LANDSCAPE SUMMARY (1 of 3) 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 Lawrence Wintermeyer CEO Innovate Finance 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 However, maintaining and further improving access to global FinTech talent has superseded passporting across the FinTech community s post-brexit priorities.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 5
THE 2016 VC FINTECH INVESTMENT LANDSCAPE SUMMARY (2 of 3) 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) 6
THE 2016 VC FINTECH INVESTMENT LANDSCAPE SUMMARY (3 of 3) 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%) 7
GLOBAL 8
GLOBAL FINTECH VC INVESTMENT - 5 YEAR TREND 2016 has seen 1,436 deals globally attracting $17.4bn of VC investment, a 10.9% increase YoY 20,000 1,420 1,617-11.2% 1,436 1,800 1,600 1,400 Deal value (USD M) 15,000 10,000 5,000 699 1,036 11,873 15,648 10.9% 17,355 1,200 1,000 800 600 400 Deal volume 0 2,581 6,252 2012 2013 2014 2015 2016 200 0 Deal value Deal volume Deal value 5 year CAGR: 46.4% Deal volume 5 year: CAGR: 15.5% 9
QUATERLY GLOBAL FINTECH VC - INVESTMENT (Q1 15 Q4 16) In 2016, global investment increased YoY in every quarter except Q3 12,000 500 10,000 453 416 414 416 366 371 450 400 Deal value (USD M) 8,000 6,000 4,000 132% 87% 7,195 7,083 324-70% 293 12% 350 300 250 200 150 Deal volume 2,000 2,290 5,317 3,848 2,128 2,428 2,714 100 50 0 Q1 Q2 Q3 Q4 2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume 0 10
GLOBAL FINTECH VC DEAL VALUE 2016 U.K. $783m Canada $183m Ireland $524m Germany $384m U.S. Japan $87m $6.2bn China $7.7bn Israel $173m Mexico Hong Kong $72m $170m India $272m Singapore $86m Brazil $161m Australia $500m $91m $100m $10m $17.4 billion invested over 1,436 deals 11
GLOBAL FINTECH VC DEAL VOLUME 2016 U.K. 173 Canada 37 Ireland Germany 17 France U.S. 50 31 650 Mexico China 28 Israel 27 21 India 82 Singapore 41 Australia 27 50 20 5 1,436 deals in 66 countries 12
GLOBAL FINTECH VC INVESTMENT - TOP 10 COUNTRIES (2015 vs 2016) China, for the first time, attracted the most investment at $7.7bn over 28 deals, beating the US which attracted $6.2bn over 650 deals Top 10 countries by deal value ($M) Top 10 countries by deal volume China 4,203 7,730 United States 650 764 United States 6,182 7,082 United Kingdom 173 164 United Kingdom 783 1,178 India 82 69 Ireland 524 97 Germany 50 33 Germany India Canada Israel Hong Kong Brazil 384 108 272 183 150 173 43 170 125 161 87 1,690 2016 2015 Singapore Canada France China Australia Israel 41 36 37 41 31 36 28 55 27 32 27 34 2016 2015 13
TOP FINTECH VC DEALS 2016 Top global FinTech VC deals Country: Country: Country: Country: Country: Payments Capital Markets Consumer Finance Capital Markets InsurTech 26-Apr-16 15-Jan-16 16-Jan-16 31-May-16 22-Feb-16 Series: B Series: Undisclosed Series: A Series: Undisclosed Series: Undisclosed Size: $4.5bn Size: $1.2bn Size: $1.0bn Size: $400m Size: $400m Top UK FinTech VC deals Country: Country: Country: Country: Country: Challenger Banks Alt Financing Wealth Management Blockchain Alt Financing 11-Jan-16 04-Oct-16 14-Nov-16 15-Jul-16 14-Dec-16 Series: Angel Series: C Series: D Series: Angel Series: A Size: $101m Size: $57m Size: $52m Size: $40m Size: $35m 14
GLOBAL FINTECH INVESTMENT RANKING 2016 Starling Bank was the only UK deal in the top 20 global deals. 500 startups was the most active global investor by number of investments Top global deals by deal value ($M) Most active global investors by deal volume 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) 400 400 394 237 220 212 180 165 153 150 150 115 103 103 101 100 100 100 100 1,200 1,013 UK deal 4,500 500 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 21 18 17 13 11 9 9 9 9 8 8 8 8 8 8 8 8 8 39 36 30 HQ in the UK 15
TOP FINTECH M&A DEALS 2016 Top global FinTech M&A deals Merger with Sale to Sale to Sale to Sale to Qingdao Haili Metal One Co Ltd EV: $5.5bn EV: $2.35bn EV: $1.5bn EV: $725m EV: $463m Data & analytics Payments Payments Capital Markets Payments 12-Jul-16 01-Apr-16 01-Jul-16 12-Sep-16 27-Jan-16 Advisor: Multiple Advisor: Multiple Advisor: BofA ML Advisor: Evercore Advisor: Unknown Top UK FinTech M&A deals Merger with Sale to Sale to Sale to Sale to EV: $5.5bn EC: $174m EV: $40m EV: $33m EV: $20m Data & analytics Enterprise Software Capital Markets Payments Payments 12-Jul-16 27-May-16 10-Jun-16 23-Dec-16 08-Jan-16 Advisor: Multiple Advisor: Quayle Munro Advisor: Quayle Munro Advisor: Deloitte Advisor: Deloitte 16
UK 17
UK FINTECH VC INVESTMENT - 5 YEAR TREND 2016 UK VC investment by deal value was down 33.7% at $783m vs $1.2bn in 2015 Deal value (USD M) 1,600 1,400 1,200 1,000 800 600 400 200 0 5.5% 173 160 164 96 63 1,180 500 727-33.7% 783 191 227 2012 2013 2014 2015 2016 Deal value (USD M) Markit Deal volume 200 180 160 140 120 100 80 60 40 20 0 Deal volume Deal value 5 year CAGR: 32.6% Deal volume 5 year: CAGR: 22.4% 18
QUATERLY UK FINTECH VC INVESTMENT (Q1 15 Q4 16) In 2016, UK investment decreased YoY in every quarter except Q3 800 700 65 70 60 600 51 44 50 Deal value (USD M) 500 400 300-14% 45 30 34 34 34-39% 40 30 Deal volume 200 100 344 295 318-61% 0.0% 123 129 129 387 236 20 10 0 Q1 Q2 Q3 Q4 2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume 0 19
UK FINTECH VC DEALS BY VERTICAL - (2015 vs 2016) Alternative Lending / Financing remains the top trend in 2016 2016 UK VC investment by vertical (% deal value) UK VC investment by vertical - 2015 vs 2016 (% deal value) Capital Markets, 2% Wealth Management, 10% Enterprise Software, 5% Payments, 6% RegTech, 3% Alternative Lending / Financing, 29% Top trends Financial inclusion, 3% Cyber security, 2% Crowdfunding, 6% Challenger Banks, 20% Money Transfer & FX, 10% Digital Currencies & Blockchain, 6% Alternative Lending / Financing Challenger Banks Money Transfer & FX Wealth Management Digital Currencies & Blockchain Crowdfunding Payments Enterprise Software RegTech Financial inclusion Capital Markets Cyber security Data & Analytics 6% 0% 6% 4% 6% 4% 5% 1% 3% 0% 3% 0% 2% 5% 2% 1% 0% 2% 12% 10% 10% 12% 29% 34% 20% 25% 2016 2015 20
UK FINTECH INVESTMENT RANKING - 2016 There were 9 Innovate Finance members within the top 20 UK deals. Techstars & FinTech Innovation Lab were the UK s top investors Top UK deals by deal value ($M) Most active UK investors by deal number Starling Bank iwoca Nutmeg SETL BillFront Tandem Sonovate Ezbob TransferWise LendInvest Property Partner Sonovate Digital Shadows Azimo OpenGamma Flypay GoCardless Crowdcube WeSwap.com Payleven 57.0 52.2 39.5 35.0 31.9 28.9 28.5 26.0 25.0 22.6 17.3 14.0 13.4 13.3 13.3 13.0 10.5 10.0 10.0 101.0 Innovate Finance member Techstars FinTech Innovation Lab Startupbootcamp Entrepreneur First Passion Capital Octopus Labs Balderton Capital Global Founders Capital Seedcamp Index Ventures Dawn Capital 3 3 3 4 5 5 5 6 7 8 8 21
UK FINTECH VC INVESTMENT - POST BREXIT ROUNDS 9 of the Top 20 UK deals closed post Brexit, with total post Brexit investment of $368m 57.0 52.2 39.5 35.0 10.0 10.5 13.3 13.3 17.3 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 Vertical Money Transfer & FX Blockchain Crowdfunding Alt Lending / Financing RegTech Payments Alt Lending / Financing Wealth Management Alt Lending / Financing Note: The Brexit vote was on the 23 rd June 2016 22
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%) 2016 UK FinTech Investor HQ Locations UK FinTech Investor HQ Locations - 2015 vs 2016 Middle East, 1% Europe, 19% Asia, 3% Other, 1% Unknown, 4% United States*, 18% United Kingdom United States* Europe 18% 25% 19% 16% 47% 54% Asia 3% 5% United Kingdom, 54% Middle East Other 1% 3% 1% 1% 2016 2015 Unknown 4% 3% * United states includes Bermuda 23
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 Deal value (USD M) Deal value (USD M) 450 400 350 300 250 200 150 100 50 0 450 400 350 300 250 200 150 100 50 0 73 158 395 230 59 44 51 Alternative Lending / Financing 219 48 45 9 130 298 77 55 28 24 21 15 12 17 23 Payments Money Transfer & FX Capital Markets Wealth Management 145 158 46 29 43 36 42 43 43 4 10 23 10 8 6 7 13 Data & Analytics* Digital currencies & blockchain 8 39 11 138 Crowdfunding Challenger banks Enterprise software 38 78 2012 2013 2014 2015 2016 *Data & Analytics figures exclude Markit VC round of $500m in 2013 24
UK ACCELORATOR FINTECH COHORT - TREND ANALYSIS (2014 2016) RegTech was the most common vertical in 2016, with Digital Currencies and Blockchain the top verticals in both 2015 and 2016 2014 2015 2016 Payments 17% Enterprise software 24% RegTech 25% Data & Analytics 17% Data & Analytics 24% Digital Currencies and Blockchain 18% Wealth Management 17% Digital Currencies and Blockchain 17% Notes: 1) Includes Barclays / Techstars, Startupbootcamp and FinTech Innovation Lab 2) % represent number of cohort companies in a vertical compared with the total cohort companies in that year 25
UK EQUITY CROWDFUNDING FINTECH INVESTMENT 2016 UK equity crowdfunding investment into FinTechs totaled $37.9M in 2016, with 45% invested into crowdfunding platforms Key statistics Equity crowdingfunding investment by FinTech vertical FinTech deal value $37.9M Capital Markets, Digital 1% Currencies & Blockchain, 4% Data & Analytics, 1% InsurTech, 1% FinTech deal volume 18 Challenger Banks, 13% Crowdfunding Platforms, 45% Average % raised vs goals (FinTech Companies) 140% Money Transfer & FX, 14% Wealth Management, 22% Source: Note: Includes Crowdcube, Angels Den, Envestors, SyndicateRoom, Seedrs 26
ANALYST SUPPLEMENT 27
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 28
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 29
2000+ ATTENDEES 300+ FINTECHS 100+ SPEAKERS Rajesh Agrawal Deputy Mayor of London for Business Giles Andrews Co-Founder & Executive Chairman, Zopa Ian Dyson Commisoner City of London Police Maria Gotsch President and CEO of the Partnership Fund for New York City 10 th - 11 th April 2017 Guildhall, London Tickets available now at 795 Brett King CEO of Moven and Host of Breaking Banks Céline Lazorthes Founder and CEO Leetchi & MANGOPAY Steel Mohnot Partner, 500 Startups Jens Spahn Parliamentary State Secretary Federal Ministry of Finance, Germany For the full speaker list go to www.ifgs2017.com Platinum Sponsor Lead Media Partner 30
APPENDIX 31
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) 32
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 33
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