European Fintech market investment increases as market matures

07 March 2018 Authored by Consultancy.uk

European fintech investment was robust over 2017, totalling around $4.7 billion, according to a new report. The region continues to mature, with funding focused on growth of current stock, although Angel / Seed investing grew slightly in the later quarters of the year.

Fintechs across various industries are exploring ways in which to pickoff high value segments incumbents, with blockchain projects being increasingly well-funded. The threat and opportunities, created by disruptive FinTech firms has not been lost on market incumbents – with a whole host of actors, from consultancy firms, accelerators seeking to get in on the action.

Some groups that are particularly keen to engage with the burgeoning startups are venture capitalists, private equity firms and corporate M&A. To better understand the flow of money into the industry, KPMG releases its quarterly ‘Fintech Pulse’ report. The report covers both global trends, as well as regional specific details. The report is based on figures from PitchBook.

Total European fintech investment

One region focused on by the report is Europe. The region remains a key driver in the financial services segment, even with one of the key regions, London, seeking to leave the wider European union – with as yet, uncertain consequences.

In terms of total invested value, Europe saw around $4.7 billion last year. Deal volume has remained relatively stable over the period, although falling from a recent peak of around 130 deals in Q2 2017 to around 90 in Q4.

Venture investment in fintech Europe

Venture capital invested around $1 billion in the most recent quarter, up from a little under $800 million in the previous quarter. Investment value has ticked up steadily in the most recent quarters, even while deal volume has decreased.

Private equity

The firm notes that the decrease in part reflects a shift – which is a wider shift in the market – away from Angel / Seed round funding, towards scaling stages, as Later VC in particular has attracted investment. The analysis does show that the long decline in Angel / Seed funding has been arrested in the most recent quarter.

Fintech corporate venture activity in Europe

Private equity investment, following a massive buy-in in 2014, when deal value hit $15.6 billion in Europe, declined steeply in the years that followed to $2.6 billion in 2016. The analysis for 2017 shows that interest from the segment has increased, rising to $4.7 billion. Interestingly, deal volume has been relatively stable over the period, at between 42 deals in 2014 and 55 deals last year.

Fintech M&A activity also saw a massive boom in 2014, increasing to $16.5 billion, with 91 deals closed. However, like with the PE market, deal activity increased while deal value declined, at 137 deals and $9.7 billion in 2015 respectively. By 2016 the market entered ‘wait and see’ mode, with deal value falling to $3.5 billion. The most recent year saw deal activity increased somewhat, with 120 deals valued at $4.4 billion.

Fintech corporate venture activity in Europe

One segment that has grown increasingly interested in the segment is corporate venture capital. The segment, seeking to leverage external innovation and talent, as well as a more open and innovative culture, has sought to buy their way into the market. The segment accounted for more than 20% of deal count in Q4, up from a little over 15% in the previous quarter. Capital invested also jumped significantly from the previous quarter, hitting almost $700 million.

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