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The 2016 VC FinTech Investment Landscape by Innovate Finance

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The 2016 VC FinTech Investment Landscape by Innovate Finace

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The 2016 VC FinTech Investment Landscape by Innovate Finance

  1. 1. THE 2016 VC FINTECH INVESTMENT LANDSCAPEFebruary 2017
  2. 2. | SUMMARY GLOBAL UK 03 08 17 ANALYST SUPPLEMENT APPENDIX 27 31 CONTENTS 2
  3. 3. | SUMMARY 3
  4. 4. | 4Source: Pitchbook (as at 30/01/17)
  5. 5. | THE 2016 VC FINTECH INVESTMENT LANDSCAPE – SUMMARY (1 of 3) 5Source: Pitchbook (as at 30/01/17) Lawrence Wintermeyer CEO – Innovate Finance 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 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 However, maintaining and further improving access to global FinTech talent has superseded passporting across the FinTech community’s post-Brexit priorities.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 “ ”
  6. 6. | THE 2016 VC FINTECH INVESTMENT LANDSCAPE – SUMMARY (2 of 3) 6Source: Pitchbook (as at 30/01/17)  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)
  7. 7. | THE 2016 VC FINTECH INVESTMENT LANDSCAPE – SUMMARY (3 of 3) 7Source: Pitchbook (as at 30/01/17)  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%)
  8. 8. | GLOBAL 8
  9. 9. | 2,581 6,252 11,873 15,648 17,355 699 1,036 1,420 1,617 1,436 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 0 5,000 10,000 15,000 20,000 2012 2013 2014 2015 2016 Dealvolume Dealvalue(USDM) Deal value Deal volume 9 GLOBAL FINTECH VC INVESTMENT - 5 YEAR TREND 10.9%  2016 has seen 1,436 deals globally attracting $17.4bn of VC investment, a 10.9% increase YoY Deal value 5 year CAGR: 46.4% Deal volume 5 year: CAGR: 15.5% Source: Pitchbook (as at 30/01/17) -11.2%
  10. 10. | 10 QUATERLY GLOBAL FINTECH VC - INVESTMENT (Q1 15 – Q4 16) 2,290 3,848 7,083 2,428 5,317 7,195 2,128 2,714 416 414 416 371 453 366 324 293 0 50 100 150 200 250 300 350 400 450 500 0 2,000 4,000 6,000 8,000 10,000 12,000 Q1 Q2 Q3 Q4 Dealvolume Dealvalue(USDM) 2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume 132% 87% -70% 12%  In 2016, global investment increased YoY in every quarter except Q3 Source: Pitchbook (as at 30/01/17)
  11. 11. | 11 GLOBAL FINTECH VC DEAL VALUE 2016 U.S. $6.2bn Canada $183m Brazil $161m Australia $91m India $272m Japan $87m China $7.7bn Ireland $524m Hong Kong $170m Germany $384m U.K. $783m Israel $173m ≥ $500m ≥ $100m ≥ $10m $17.4 billion invested over 1,436 deals Mexico $72m Singapore $86m Source: Pitchbook (as at 30/01/17)
  12. 12. | 12 GLOBAL FINTECH VC DEAL VOLUME 2016 U.S. 650 Mexico 21 Canada 37 Australia 27 Singapore 41 India 82 China 28 Ireland 17 France 31 Germany 50 U.K. 173 Israel 27 ≥ 50 ≥ 20 ≥ 5 1,436 deals in 66 countries Source: Pitchbook (as at 30/01/17)
  13. 13. | 13 GLOBAL FINTECH VC INVESTMENT - TOP 10 COUNTRIES (2015 vs 2016) 650 173 82 50 41 37 31 28 27 27 764 164 69 33 36 41 36 55 32 34 United States United Kingdom India Germany Singapore Canada France China Australia Israel 2016 2015 7,730 6,182 783 524 384 272 183 173 170 161 4,203 7,082 1,178 97 108 1,690 150 43 125 87 China United States United Kingdom Ireland Germany India Canada Israel Hong Kong Brazil 2016 2015 Top 10 countries by deal volumeTop 10 countries by deal value ($M)  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 Source: Pitchbook (as at 30/01/17)
  14. 14. | Country: Sector: Challenger Banks Date: 11-Jan-16 Series: Angel Size: $101m Country: Sector: Alt Financing Date: 04-Oct-16 Series: C Size: $57m Country: Sector: Wealth Management Date: 14-Nov-16 Series: D Size: $52m Country: Sector: Blockchain Date: 15-Jul-16 Series: Angel Size: $40m Country: Sector: Alt Financing Date: 14-Dec-16 Series: A Size: $35m Country: Sector: Payments Date: 26-Apr-16 Series: B Size: $4.5bn Country: Sector: InsurTech Date: 22-Feb-16 Series: Undisclosed Size: $400m Country: Sector: Capital Markets Date: 15-Jan-16 Series: Undisclosed Size: $1.2bn Country: Sector: Consumer Finance Date: 16-Jan-16 Series: A Size: $1.0bn Country: Sector: Capital Markets Date: 31-May-16 Series: Undisclosed Size: $400m  Top UK FinTech VC deals 14 TOP FINTECH VC DEALS 2016  Top global FinTech VC deals Source: Pitchbook (as at 30/01/17)
  15. 15. | 4,500 1,200 1,013 400 400 394 237 220 212 180 165 153 150 150 115 103 103 101 100 100 100 100 AliPay (China) Lu.com (China) JD Finance (China) ION Trading (Ireland) Oscar (US) 51credit.com (China) QuarterSpot (US) Solar Mosaic (US) PowerPlan (US) Payoneer (US) WeLab (Hong Kong) Weidai.com (China) Stripe (US) LendUp (US) PaySimple (US) Zibby (US) Kreditech (Germany) Starling Bank (UK) LendingHome (US) DPO Group (Ireland) Affirm (US) Betterment (US) Most active global investors by deal volume 15 GLOBAL FINTECH INVESTMENT RANKING 2016 Top global deals by deal value ($M)  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 39 36 30 21 18 17 13 11 9 9 9 9 8 8 8 8 8 8 8 8 8 500 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 UK deal HQ in the UK Source: Pitchbook (as at 30/01/17)
  16. 16. |  Top UK FinTech M&A deals 16 TOP FINTECH M&A DEALS 2016  Top global FinTech M&A deals EV: $20m Sector: Payments Date: 08-Jan-16 Advisor: Deloitte Sale toMerger with EV: $5.5bn Sector: Data & analytics Date: 12-Jul-16 Advisor: Multiple EC: $174m Sector: Enterprise Software Date: 27-May-16 Advisor: Quayle Munro EV: $40m Sector: Capital Markets Date: 10-Jun-16 Advisor: Quayle Munro EV: $33m Sector: Payments Date: 23-Dec-16 Advisor: Deloitte Sale to Sale to Sale to EV: $2.35bn Sector: Payments Date: 01-Apr-16 Advisor: Multiple EV: $1.5bn Sector: Payments Date: 01-Jul-16 Advisor: BofA ML EV: $725m Sector: Capital Markets Date: 12-Sep-16 Advisor: Evercore EV: $463m Sector: Payments Date: 27-Jan-16 Advisor: Unknown Sale to Sale to Sale to Sale to Qingdao Haili Metal One Co Ltd Merger with EV: $5.5bn Sector: Data & analytics Date: 12-Jul-16 Advisor: Multiple Source: Pitchbook (as at 30/01/17)
  17. 17. | UK 17
  18. 18. | 191 227 727 1,180 783 500 63 96 160 164 173 0 20 40 60 80 100 120 140 160 180 200 0 200 400 600 800 1,000 1,200 1,400 1,600 2012 2013 2014 2015 2016 Dealvolume Dealvalue(USDM) Deal value (USD M) Markit Deal volume -33.7% 5.5% 18 UK FINTECH VC INVESTMENT - 5 YEAR TREND Deal value 5 year CAGR: 32.6% Deal volume 5 year: CAGR: 22.4%  2016 UK VC investment by deal value was down 33.7% at $783m vs $1.2bn in 2015 Source: Pitchbook (as at 30/01/17)
  19. 19. | 19 QUATERLY UK FINTECH VC INVESTMENT (Q1 15 – Q4 16) 344 318 129 387 295 123 129 236 45 51 34 34 65 30 44 34 0 10 20 30 40 50 60 70 0 100 200 300 400 500 600 700 800 Q1 Q2 Q3 Q4 Dealvolume Dealvalue(USDM) 2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume -14% -61% 0.0% -39%  In 2016, UK investment decreased YoY in every quarter except Q3 Source: Pitchbook (as at 30/01/17)
  20. 20. | Challenger Banks, 20% Money Transfer & FX, 10% Digital Currencies & Blockchain, 6% Crowdfunding, 6% Alternative Lending / Financing, 29% Payments, 6% Enterprise Software, 5% Wealth Management, 10% Capital Markets, 2% RegTech, 3% Financial inclusion, 3% Cyber security, 2%  Alternative Lending / Financing remains the top trend in 2016 20 UK FINTECH VC DEALS BY VERTICAL - (2015 vs 2016) UK VC investment by vertical - 2015 vs 2016 (% deal value) 2016 UK VC investment by vertical (% deal value) Source: Pitchbook (as at 30/01/17) Top trends 29% 20% 10% 10% 6% 6% 6% 5% 3% 3% 2% 2% 0% 34% 12% 25% 12% 0% 4% 4% 1% 0% 0% 5% 1% 2% Alternative Lending / Financing Challenger Banks Money Transfer & FX Wealth Management Digital Currencies & Blockchain Crowdfunding Payments Enterprise Software RegTech Financial inclusion Capital Markets Cyber security Data & Analytics 2016 2015
  21. 21. | Most active UK investors by deal number 21 UK FINTECH INVESTMENT RANKING - 2016 Top UK deals by deal value ($M)  There were 9 Innovate Finance members within the top 20 UK deals. Techstars & FinTech Innovation Lab were the UK’s top investors 101.0 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 Starling Bank iwoca Nutmeg SETL BillFront Tandem Sonovate Ezbob TransferWise LendInvest Property Partner Sonovate Digital Shadows Azimo OpenGamma Flypay GoCardless Crowdcube WeSwap.com Payleven 8 8 7 6 5 5 5 4 3 3 3 Techstars FinTech Innovation Lab Startupbootcamp Entrepreneur First Passion Capital Octopus Labs Balderton Capital Global Founders Capital Seedcamp Index Ventures Dawn Capital Innovate Finance member Source: Pitchbook (as at 30/01/17)
  22. 22. | 10.0 39.5 10.5 57.0 13.3 13.3 17.3 52.2 35.0 22 UK FINTECH VC INVESTMENT - POST BREXIT ROUNDS  9 of the Top 20 UK deals closed post Brexit, with total post Brexit investment of $368m Source: Pitchbook (as at 30/01/17) Note: The Brexit vote was on the 23rd June 2016 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 Crowd- funding Alt Lending / Financing RegTech Payments Alt Lending / Financing Wealth Management Alt Lending / Financing
  23. 23. | 23 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%) * United states includes BermudaSource: Pitchbook (as at 30/01/17) United States*, 18% United Kingdom, 54% Europe, 19% Asia, 3% Middle East, 1% Other, 1% Unknown, 4% UK FinTech Investor HQ Locations - 2015 vs 20162016 UK FinTech Investor HQ Locations 54% 18% 19% 3% 1% 1% 4% 47% 25% 16% 5% 3% 1% 3% United Kingdom United States* Europe Asia Middle East Other Unknown 2016 2015
  24. 24. | 24 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 73 44 9 24 17 59 51 28 21 23 158 219 130 15 39 395 48 298 55 138 230 45 77 12 78 0 50 100 150 200 250 300 350 400 450 Alternative Lending / Financing Payments Money Transfer & FX Capital Markets Wealth Management Dealvalue(USDM) 4 8 710 10 6 13 29 46 36 43 823 42 145 11 43 43 158 38 0 50 100 150 200 250 300 350 400 450 Data & Analytics* Digital currencies & blockchain Crowdfunding Challenger banks Enterprise software Dealvalue(USDM) 2012 2013 2014 2015 2016 Source: Pitchbook (as at 30/01/17) *Data & Analytics figures exclude Markit VC round of $500m in 2013
  25. 25. | 25 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 UK ACCELORATOR FINTECH COHORT - TREND ANALYSIS (2014 – 2016) 2014 RegTech 25% Digital Currencies and Blockchain 17% Wealth Management 17% Enterprise software 24% Data & Analytics 24% Digital Currencies and Blockchain 18% Payments 17% Data & Analytics 17% 2015 2016  RegTech was the most common vertical in 2016, with Digital Currencies and Blockchain the top verticals in both 2015 and 2016
  26. 26. | 26 UK EQUITY CROWDFUNDING FINTECH INVESTMENT 2016 Equity crowdingfunding investment by FinTech verticalKey statistics Note: Includes Crowdcube, Angels Den, Envestors, SyndicateRoom, Seedrs Source:  UK equity crowdfunding investment into FinTechs totaled $37.9M in 2016, with 45% invested into crowdfunding platforms Crowdfunding Platforms, 45% Wealth Management, 22% Money Transfer & FX, 14% Challenger Banks, 13% Digital Currencies & Blockchain, 4% Capital Markets, 1% Data & Analytics, 1% InsurTech, 1% FinTech deal value $37.9M FinTech deal volume 18 Average % raised vs goals (FinTech Companies) 140%
  27. 27. | ANALYST SUPPLEMENT 27
  28. 28. | 2016 GLOBAL VC FINTECH INVESTMENT LANDSCAPE – ANALYST SUPPLEMENT 28Source: Pitchbook (as at 30/01/17) 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
  29. 29. | 2016 UK VC FINTECH INVESTMENT LANDSCAPE – ANALYST SUPPLEMENT 29Source: Pitchbook (as at 30/01/17) 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
  30. 30. | 30 For the full speaker list go to www.ifgs2017.com Rajesh Agrawal Deputy Mayor of London for Business Maria Gotsch President and CEO of the Partnership Fund for New York City Giles Andrews Co-Founder & Executive Chairman, Zopa Ian Dyson Commisoner City of London Police Steel Mohnot Partner, 500 Startups Brett King CEO of Moven and Host of Breaking Banks Jens Spahn Parliamentary State Secretary Federal Ministry of Finance, Germany 2000+ ATTENDEES 300+ FINTECHS 100+ SPEAKERS Platinum Sponsor Lead Media Partner 10th - 11th April 2017 Guildhall, London Tickets available now at £795 Poppy Gustafsson CEO (EMEA), Darktrace
  31. 31. | APPENDIX 31
  32. 32. | 32 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)
  33. 33. | 33 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
  34. 34. | END 34

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