Global fintech investment sees sharp decline in 2016 despite record VC funding: KPMG Q4’16 Pulse of Fintech Report

Posted on February 28th, 2017
Entrepreneurs

Today's top entrepreneurship and business stories (28 February)
After 2015’s record-setting US$46.7 billion in total global funding to fintech companies, 2016 experienced a decline in the market with a 47.2% slide in fintech investment, according to KPMG International’s The Pulse of Fintech – a quarterly report on global fintech investment. The 2016 fintech funding total of $24.7B was still significant compared to pre-2015 investment levels*.

Merger and acquisitions (M&A) and private equity (PE) fintech deals dropped considerably in 2016, while venture capital (VC) investment reached a new high of US$13.6B compared to US$12.7B in 2015. Three Chinese mega-rounds buoyed global fintech funding significantly, led by the Q2’16 Ant Financial record-setting US$4.5 B funding round.

While VC investment softened somewhat in the second half of 2016 due to a decline in mega-rounds, the year ended on a positive note, with US$2B invested in Q4’16 across 200 deals, compared to US$1.9B across 176 deals during the previous quarter.

“While Fintech in South Africa, or across the African continent, still has not seen the level of investment in other global jurisdictions, there is an accelerating trend of fintech becoming the focus of investors, early stage (VC, angel and seed) and later stage (especially private equity),” says Joelene Pierce, a Partner in Financial Services for KPMG in South Africa.

“However this is virtually immaterial compared to the annual spend on IT between the South African banks, as well as the Insurance, Health and Wellbeing sectors. A significant amount of such ‘in-house’ spending on Fintech is expectedly in the form of enterprise development advances to start-ups and SMEs, developing Fintech products and services, as well as corporate venture capital type deals.

“The expectation is that the internal ‘corporate venturing’ type Fintech activities of the big banks and the large players in South African health and insurance sectors will have a knock-on effect on increasingly paving the way for pure private equity and venture capital investors to invest directly in Fintech ventures,” says Pierce.

Key 2016 annual highlights

  • Total 2016 fintech funding declined to US$24.7B from US$46.7B in 2015, while deal activity dropped from 1,255 to 1,076.
  • VC funding to fintech companies reached a record US$13.6B compared to US$12.7B in 2015, with 840 deals recorded.
  • Overall fintech deal funding in Asia grew slightly year over year, reaching a new record high of US$8.6B invested compared to US$8.4B in 2015. 3 mega-rounds accounted for over half of this total.
  • Both overall funding and VC funding to fintech declined in the US, with totals of US$12.8B and US$4.6B respectively.
  • Overall European fintech funding dropped sharply in 2016, even though transaction volume remained quite resilient, reaching US$2.2B across 318 deals.
  • Corporate VC investment in fintech rose for the seventh straight year, reaching 145 deals, US$8.5B in 2016.

Western Cape residents to use digital game to drive social change
A digital game competition is set to give Western Cape residents the opportunity to drive social change in their communities.

“The Serious About Games initiative uses a new approach to address the challenges facing the province’s poorest residents,” said Alan Winde, Minister of Economic Opportunities.

Four teams have been selected as semi-finalists and have been awarded R50 000 to develop the prototype of their game, which must be ready for final judging by 24 March. The project is a collaboration between the Western Cape Department of Economic Development and Tourism, the Cape Innovation and Technology Initiative (CiTi), Interactive Entertainment South Africa (IESA), 67 Games, and the Cape Craft and Design Institute (CCDI).

Minister Winde said the Serious About Games initiative called for game developers to work with communities to create a game which would allow residents to reimagine their communities, with a focus on better access to economic opportunities.

“We asked gamers to partner with community organisations to look at the biggest social and economic challenges caused by apartheid urban planning,” Minister Winde said.

“The focus is on creating a platform for innovative community-sourced solutions to these problems. We also hope to foster a culture of innovation in our communities. As government, we are thinking of new ways to obtain data and trends we can use to make sure our projects are responsive to residents’ needs,” said Minister Winde.

Michelle Matthews, Head of Innovation at CiTi, said: “We are seeing a growing community of professionals from different backgrounds coming together to use games as a platform for education and learning across sectors, from civic engagement to healthcare. In the coming months, we hope this competition will serve as a catalyst for the Serious About Games community.”

The winning team receives R1 million to develop their game and make it available to communities. The panel of judges in the semi-final included WITS game design lecturer Hanli Geyser, international indie game developer Veve Jaffer, start-up consultant Alex Fraser, gaming industry lawyer Nicholas Hall, and Olivia Dyers and Bianca Mpahlaza-Schiff of DEDAT. (via MyPR.co.za)

New FemBioBiz Acceleration Programme to boost women in biosciences
An acceleration programme aimed at supporting women in biosciences was launched by the NEPAD Southern Africa Network for Biosciences (SANBio), with support from the BioFISA II programme, on Tuesday, 21 February 2017.

SANBio is a platform for shared biosciences research, development and innovation to address health and nutrition issues of Southern Africa and it is hosted by the Council for Scientific and Industrial Research (CSIR) in South Africa.

The FemBioBiz Acceleration Programme has been created to develop leadership, technological and business skills in female-owned businesses in the SADC region to support deal-making and business acceleration in the Biosciences arena.

“While there have been attempts at improving participation of women in Science, Technology, Engineering and Mathematics (STEM), the representation of women in technology-led enterprises and, in particular, in leadership or managerial positions or as founders of businesses is very low in the SADC Region,” Dr Ereck Chakauya, SANBio network manager notes.

“This programme creates a platform for peer learning and will empower women to lead in health and nutrition through science and technology. In doing so, we envision that the women involved will inspire others to realise the business potential in science,” remarks BioFISA II programme manager, Zvikomborero Tangawamira.

The top performers will have the opportunity to meet investors, business experts and potential mentors and visit Cape Town to participate at the 2017 SA Innovation Summit. The best performer will receive a grant of R250,000 to move the business forward and a trip to attend Europe’s leading start-up event Slush 2017 in Finland, where international opportunities await.

More information on the competition can be found at www.nepadsanbio.org under the Campaigns & Competitions section.