While globally VC-backed fintech companies saw a decline both in the number of deals and volume in 2016 from the highs of 2015, Asia maintained its growth momentum as funding of fintech companies reached an all-time in 2016.
Globally, VC-backed fintech companies attracted $12.7 billion across 836 deals in 2016. Of this Asia accounted for approximately 20% of deals globally and 43% of global funding in 2016, showed a report by CBInsights.
And while on a year-on-year basis, funding to VC-backed fintech companies fell 13 per cent while deals dropped 1 per cent globally, In Asia VC-backed fintech startups raised $5.4 billion across 165 deals, setting a new record for fintech companies in both deals and funding in the continent.
Also in an inverse trend, while fintech deals rose marginally in the fourth quarter of 2016 after a two-quarter drop, deals in Asia hit a five-quarter low in the three-month period ended December 31.
Deals to VC-backed fintech companies rose 7 per cent on a quarterly basis in Q4’16. Global fintech funding ticked up 2% in Q4’16, but was off more than $2.4 billion from the highs of the first quarter of 2016. On the other hand Asia saw mega-round activity drop in Q4’16 after staying level for four consecutive quarters.
The funding activity among fintech startups in Asia declined in the fourth quarter to $700 million across 35 deals, a sharp decline from $2.7 billion in the first quarter of the year and $1.2 billion in the third quarter}
Within Asia, China and Hong Kong drove the fintech deal making, with ten of the largest deals in 2016 coming from those regions led by a $1.2 billion funding round of Lufax.com and $1 billion round raised by JD Finance. Other in the top ten list include a $449 million round by Qufenqi.com and $273 million fund raise by HNA.
The venture-backed list, however, does not include doesn’t include Alibaba affiliate Ant Financial, which raised $4.5B in a private placement in April last year.
Within China investment reached new highs in 2016, when both deals and dollars reach a 5-year high with $4.6 billion raised across 46 deals. However, during the previous quarter this activity dropped for the second consecutive quarter raking in $600 million across eight deals.
Unlike previous quarters the late stage investment round in the fintech space received a boost in 2016, with 9 per cent of the total deals coming in at the Series D level. Seed- stage investments also recovered after a two-quarter dip accounting for 26 per cent of the total deal activity in the quarter.
In Q4’16, the median early- stage fintech deal size in Asia rose for the third consecutive quarter to $3.5M, which was the best in 2016, but still below the highs of the same quarter a year ago.
Among investors, 500 Startups emerged as the most active venture capital investor in Asian fintech startups followed by East Ventures and Sequoia Capital India tied at the second spot while SBI Investment and IDG Capital Partners rounded out the top five. The list also included several fintech-focused venture firms including Ribbit Capital, QED Investors, and Nyca Partners.
India saw a drastic drop in the amount of funds raised by fintech startups in 2016 even as the number of deals continued to rise. This can be attributed largely to the mega funding rounds raised by leading digital payments firm Paytm in 2015. In 2016, VC-backed fintech companies in India raised $388 million across 50 deals, this was a 75 per cent decline in the funds raised in 2015.
On a quarterly basis too, this trend was visible as Indian fintech companies raised $32 million across 10 deals in the OCt-Dec quarter, which was a 5-quarter low in funding and the second lowest in deals. The largest deal in the quarter was a $10 million Series B investment to alternative lending platform Indifi Technologies.