The share of global FinTech investments valued under $1m has halved in the last 5 quarters.
The number of FinTech deals fell by 29.5% YoY in Q2 2017. Worldwide small deals have suffered the most from this fall in total deal numbers with investments valued under $1m falling progressively from 34% in Q2 2016 to 17% in Q2 2017. Despite falling total deals, the number of deals valued above $5m was up by six in Q2 2017 compared to the same period last year. The second quarter of the year saw deals valued 0-$1m, $5-$10m and $10-$25m receive an equal share of deals. In contrast Q2 2016 saw deals valued below $1m receive almost 1.5 times the combined share of deals valued between $5-$25m.
The share of FinTech investments valued below $1m is set to fall again in 2017
- The trend seen in the quarterly graph above has been developing since 2014. In addition, figures for 2017 so far suggest that the fall in the share of deals valued under $1m dollars may be speeding up. This segment lost 4% of deal share in 2015, 7% in 2016 and looks set to lose 14% of deal share by the end of 2017, assuming the trend highlighted in the last five quarters continues.
- The yearly data exposes growth in deals between $1m and $5m. As the FinTech sector proves its worth, investors are willing to commit slightly more capital in the early stages.
- There has also been growth in the number of deals valued between $5m and $25m, taking 34% of deal share in H1 2017. Part of this segment is a $10m deal to financial research & analytics company Quovo, in April, from F-Prime Capital Partners and Napier Park Global Capital.
The number of large deals is increasing consistently in Europe and North America
- The total number of disclosed funding rounds in North America fell by just over a third in Q4 2016. Despite a small increase in the opening quarter of 2017, deal numbers have yet to recover. Interestingly, this fall in disclosed funding rounds was entirely due to a drop of 48.8% in the number of deals valued under $5m in Q4 2016 compared to the previous quarter. Since the end of 2016 the number of deals valued in this segment has fallen further, settling at 67.4% lower in Q2 2017 than in Q2 2016. In this period, the number of deals valued above $5m has risen by 10%.
- In contrast to the sudden fall in deals valued under $5m in North America, deals valued between $1m-5m have remained reasonably consistent in Europe with the number of deals valued under $1m falling by an average by 19.6% each quarter as investors look for early stage opportunities in emerging markets.
- The fall in the number of smaller deals during 2016 was also seen in the yearly data as mentioned previously by FinTech Global.
Unlike other regions Asia has not seen an increase in the share of deals valued above $25m
- Unlike Europe and North America which have both seen increases in the share of large deals, over the last four quarters Asia has seen a steady reduction – dropping from a high of 27% in Q3 2017 to 21% in the first two quarters of this year.
- The combined effect of a drop in the share of the largest deals and smallest deals is that over the last five quarters the share of deals valued between $1m and $25m has grown by 20%.
- Q1 2017 was a particularly weak quarter for Asia in terms of deal numbers, with the number of deals closed in all segments falling.
In Q2 2017 the Average deal size in North America was more than 2.7 times the average deal size in Europe and 5 times the average deal size in Asia.
- In the last five quarters the average deal size in North America has increased by $15.6m as a result of the shift to larger deals.
- The average deal size in Europe rose by 21.8% in Q2 2017 compared to Q2 2016. However, it remains only 36.7% of the average deal size in North America.
- With an increase in mid-size deals in Asia the average deal size has halved in the last five quarters.
The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2017 FinTech Global