Fintech Sector Maturing in 2017

Financial Technology (fintech) has seen a lot of venture capital funding over the past few years. How have its funding trends evolved over time? Through the insights derived from our fintech research platform, we conclude that the fintech sector is maturing.

We have come to this conclusion from the following four takeaways:

  • Overall fintech funding trends are stable
  • Fintech investor interest is constant
  • Fintech funding has shifted to mid- and late-stage event
  • The average fintech funding size is growing

We will illustrate these takeaways with a series of graphics to show that the sector is maturing.

Fintech Funding Relatively Stable in 2017

We will start off by examining the fintech funding trends over the years. Let’s look at the annual fintech funding amount stacked by quarter.

Fintech Funding Amount by Quarter
Fintech Funding Amount by Quarter

As we can see from the graphic, fintech funding in the first three quarters of 2017 is slightly down relative to 2016. In fact, it’s 92% of the funding in Q1-Q3 2016. Therefore we expect to finish off the year more or less on par with last year.

We have seen that funding trends are steady, but what about investor appetite?

Fintech Investor Interest Remains Constant in 2017

Let’s now look at the number of fintech investors who participated in each investment to see how investor activity has evolved over time.

Fintech Investor Activity by Quarter
Fintech Investor Activity by Quarter

The above graphic shows that fintech investor participation in the first three quarters of 2017 is slightly higher than 2016. It grew by 2% from the investor participation in Q1-Q3 2016. This implies the sector will end the year slightly up or flat year-over-year in fintech investor participation from 2016 to 2017.

We have seen that overall funding amounts and investor activity have remained generally flat, but what about the stages of investment?

Fintech Funding Shifted to Mid- and Late-Stage Events

Let’s now take a deep dive and analyze fintech investors’ behavior in detail. Below are the Fintech Funding Amount by Round and Funding Event Count by Round graphics. The first graphic shows the total amount of funding that went into a specific funding round (such as Seed or Series A), while the second graphic shows the total number of funding events for a specific round.

Fintech Funding Amount by Round in Recent Quarters
Fintech Funding Amount by Round in Recent Quarters

The analysis above shows that Seed funding saw a 56% drop and Series A saw a 45% drop from Q2 2017 to Q3 2017. However, fintech funding amounts for later stage events grew from the previous quarter. Series B funding amount grew by 200% and Series C grew by 40%.

Based on the above, we can conclude that fintech funding has shifted from early-stage to mid- and late-stage funding. Let’s see if the Funding Event Count by Round graphic reinforces this conclusion.

Fintech Funding Count by Round in Recent Quarters
Fintech Funding Count by Round in Recent Quarters

We see that Seed and Series A rounds both saw a significant drop in funding events over the past quarter as well. Seed round events saw a 49% drop and Series A events saw a 25% drop from Q2 2017 to Q3 2017. In fact, the decline in Seed and Series A funding events appears to be a trend over the past few quarters.

On the other hand, Series B and later stage funding events have seen growth. Series B events grew by 82% and Series C events grew by 45% from Q2 2017 to Q3 2017.

The above data indicates that fintech investment has moved to later-stage ventures.

Fintech funding and investor activity have plateaued and the funding has shifted to mid- and late-stage. What about each individual investment deal size?

Average Fintech Funding Deal Size Growing in 2017

If the shift of fintech funding from early-stage to later-stage events indicates that the sector is maturing, we would also expect the average deal size to be growing. This is because as a sector matures, the winners would need larger capital infusions to scale.

Fintech Average Funding Event Size Over Time
Fintech Average Funding Event Size Over Time

This graphic does in fact indicate that the average fintech funding amounts have grown significantly over the past few years. The trendline shows that from Q3 2011 to Q3 2017 the average deal size has grown by approximately 700%. This consistent upward trend in average deal size indicates that the fintech sector is indeed maturing.

Conclusion: Fintech Sector Now Maturing

In summary, we’ve seen that the overall fintech funding and investor interest has remained steady. At the same time, the funding has shifted from early-stage events to later-stage events. Moreover, the average fintech funding amount has grown consistently year-over-year. These takeaways lead us to conclude that the fintech sector is indeed maturing. It’ll be interesting to see if this trend continues into 2018.

What are your thoughts on this? Let us know in the comments section below.

To learn more about our complete Financial Technology research platform, visit us at www.venturescanner.com or contact us at info@venturescanner.com.

Financial Technology Activity by Selected Investors – Q3 2017

The following graph summarizes investor activity in the Financial Technology (Fintech) space. Please note these graphics are made using data through July 2017.

Financial Technology Activity by Selected Investors
Financial Technology Activity by Selected Investors

The above analysis summarizes the total number of investment rounds Fintech investors participated in, and the number of unique companies funded by those investors. Major investors into the space include Accel Partners, Sequoia Capital, YC, 500 Startups, and Index Ventures.

We are currently tracking 2336 Financial Technology companies in 16 categories across 64 countries, with a total of $79.3 Billion in funding. Click here to learn more about the full Financial Technology market report.

Financial Technology Exits by Category and by Year – Q3 2017

The following two graphs show exit activity in the Financial Technology sector. The graphics include data through July 2017.

Financial Technology Exit Activity by Category
Financial Technology Exit Activity by Category

The above graph summarizes the number of exits (acquisitions and IPOs) in each Financial Technology category. The Payments Backend category is leading the sector with 39 acquisitions and 8 IPOs. The Personal Finance category follows behind with 35 acquisitions and 2 IPOs.

Financial Technology Exit Activity by Year
Financial Technology Exit Activity by Year

The above graph summarizes the number of exits (acquisitions and IPOs) in Financial Technology by year. 2016 leads the sector with 56 acquisitions and 7 IPOs. 2017 follows behind with 48 acquisitions and 1 IPO.

We are currently tracking 2330 Financial Technology companies in 16 categories across 64 countries, with a total of $78 Billion in funding. Click here to see the full Financial Technology market report.

Venture Investing in Financial Technology – Q3 2017

The following graphs highlight venture investing trends into the Financial Technology sector. The graphics include data through July 2017.

Financial Technology Venture Investing by Category
Financial Technology Venture Investing by Category

The above graph compares the total venture funding in each Fintech category to the number of companies in the category. The Consumer Lending category leads both metrics, with around $22B in funding and about 300 startups.

Financial Technology Average Funding by Category
Financial Technology Average Funding by Category

The above analysis summarizes the average company funding in each Fintech category. The Consumer Lending category leads the sector with around $104M in average funding per company, followed by the Consumer Payments category with around $100M in average funding per company.

We are currently tracking 2323 Fintech companies in 16 categories across 64 countries, with a total of $77.6B in funding. Click here to learn more about the full Financial Technology market report.

Age by Category in Financial Technology – Q3 2017

The following graph shows average and median age in the Financial Technology sector. The graphic includes data through July 2017.

financial-technology-age-by-category
Age by Category in Financial Technology

The above graph summarizes the average and median age of companies in each Financial Technology category. The Payments Backend category has the highest average age at around 10 years, and the Banking Infrastructure category is the runner-up with an average age of around 9 years. Both the Payments Backend and Banking Infrastructure categories have the highest median age at around 8.5 years. On the other hand, Retail Investing is the youngest Financial Technology category with an average age of around 6 years and a median age of around 5.5 years.

We are currently tracking 2307 Financial Technology companies in 16 categories across 64 countries, with a total of $75.4B in funding. Click here to learn more about the full Financial Technology market report.

Financial Technology Companies Founded by Year – Q3 2017

The following graph shows the founding year distribution in the Financial Technology sector. The graphic includes data through July 2017.

Financial Technology Companies Founded by Year
Financial Technology Companies Founded by Year

The above graph summarizes the number of Financial Technology companies founded in a certain year. 2012 ranks at the top with around 307 companies founded in that year alone. 2013 is the runner-up with 286 companies founded in that year.

We are currently tracking 2296 Financial Technology companies in 16 categories across 64 countries, with a total of $73.8 Billion in funding. Click here to learn more about the full Financial Technology market report.

Financial Technology Funding by Round – Q3 2017

The following two graphs summarize the rounds of funding going into the Financial Technology space. Please note these graphics are made using data through July 2017.

Financial Technology Funding Amount by Round
Financial Technology Funding Amount by Round

The graph above shows the total amount of VC funding broken out by round. In 2016, Series B funding has accounted for a substantial amount of total funding, with Series C and Late Stage funding coming in at second. In 2015, all types of VC funding accounted for approximately the same amount, with the exception of Seed funding.

Financial Technology Funding Count by Round
Financial Technology Funding Count by Round

The graph above shows the total count of funding events broken out by round. The general trend over the past few years has been a larger number of early stage funding events, such as Seed, Series A, and Series B funding events–and a diminishing number of events in the later stages.

We are currently tracking 2286 Financial Technology companies in 16 categories across 63 countries, with a total of $73.2 Billion in funding. Click here to learn more about the full Financial Technology market report.