Swiss FinTech funding slows down due to lack of later-stage deals
Capital invested in Swiss FinTech companies returned to normal levels after large deals pushed quarterly funding to record highs in H1 2017
There were three deals valued over $100m in the first six months of 2017. The largest of these was a $353.2m private equity investment in Avaloq, a Zurich-based financial software firm, from Warburg Pincus in Q1.
The lack of later-stage deals since then has resulted in lower overall investment in the subsequent quarters. However, capital invested over this period was still historically high when compared to previous quarterly figures.
$80.5m was invested in Q1 2018 making it the fourth strongest funding quarter for the Swiss FinTech sector to date.
There were eight deals completed in Q1 2018, a figure within range of the deal activity recorded in the previous two quarters.
Investment in Q1 reached less than one-tenth of last year’s total
Capital invested in 2017 rocketed to reach a record total of $866m across 40 deals. More than two thirds of this funding came from just three deals valued $100m and above.
The $80.5m invested in the first quarter of 2018 equates to only 9.3% of last year’s total. However, the irregularity of later-stage deals can lead to variable quarterly results. Compared to funding raised from deals valued less than $100m in 2017, investment in Q1 2018 represents 31%, showing that Swiss FinTech investment activity had a robust quarter.
Half of the deals completed in Q1 2018 were ICOs, accounting for 98.2% of the quarterly investment total. The growth of ICOs in Switzerland has been driven by its strong blockchain and cryptocurrency sectors. The Swiss regulator, the Financial Market Supervisory Authority (FINMA), recently laid out regulatory guidelines to support ICOs.
Deal activity, however, is not on track to surpass last year’s total. The eight deals completed in Q1 2018 represents just 20% of the 40 transactions closed in 2017.
Switzerland has become a global hub for Blockchain & Cryptocurrency investment
The share of deals completed by companies in the Blockchain & Cryptocurrencies subsector jumped from 4.3% in 2014 to 27.5% in 2017. This trend continued in Q1 2018 when 37.5% of all investments were raised by companies in this category.
Switzerland has become a global hub for cryptocurrencies and the blockchain technology which underpins them. The small town of Zug, which has been dubbed “Crypto Valley”, is at the centre of this movement with its strong ecosystem of leading cryptographic companies, supportive regulatory framework, and access to capital and talent. It is also home to the non-profit organization, the Crypto Valley Association (CVA), which aims to attract and support blockchaina companies and organizations to Switzerland.
The Infrastructure & Enterprise Software sector also registered a big increase in deal share between 2014 and 2017 from 13% to 22.5%, although no deals were completed by companies in this subsector in Q1 2018.
Later-stage deals are increasing in frequency as the Swiss FinTech ecosystem matures
Deals valued less than $1m decreased from 62.4% in 2014 to just 12.5% in 2017. There were no such deals in the first quarter of 2018.
Between 2014 and 2016, the drop in sub-$1m deals was largely offset by an increase in deals valued between $1-5m, from 25% to 52.3% over this period.
However, 2017 saw a more marked shift towards later-stage deals. Almost 60% of deals completed during this year were valued above $5m, while nearly a third were valued above $20m.
Two deals completed in Q1 2018 were valued above $20m. The largest of these was a $31m investment in Trade.io, a blockchain trading platform, raised via ICO.
The following investor(s) were tagged in this article.