Commenting on the findings, Charlotte Crosswell, CEO of Innovate Finance, said: “Our 2017 FinTech VC Landscape report demonstrates that the UK’s FinTech sector is cementing its position as a world leader. Investment in UK FinTech firms increased 153%, and of these inflows into the UK, 54% came from non-domiciled VCs. There is no doubt that London’s position as a leading financial and technology centre is driven by the UK’s focus on policy and talent, allowing us to attract the entrepreneurs and investors that are bringing real, positive change to the world of FinTech.”
VC investment in UK FinTech firms was up 153% at $1.8 billion, more than doubling the investment in 2016 of $704 million and surpassing the previous record-breaking total in 2015 of $1.1 billion. The UK attracted 224 deals in 2017, the highest volume outside the US (765). The top two UK deals, TransferWise and OakNorth, both raised rounds of over $200 million and were ranked amongst the top 20 global deals.
Industry VCs see this as the inevitable result of the UK’s leading FinTech position and fundamental strength as a FinTech ecosystem. Augmentum Capital believes the UK remains at the epicentre of FinTech, continuing to attract new companies and fresh capital both from corporates and venture funds. Other contributing factors include a maturing industry, stronger talent base, the progressive regulatory environment and a high availability of capital.
The maturing of the FinTech industry gave rise to larger rounds in 2017, with the top five FinTech deals in the UK all raising over $90 million (TransferWise, OakNorth, Funding Circle, Interactive Investor and Monzo). Of the total 2017 UK VC investment, 24% went into Challenger Banks, followed by Money Transfer and FX (21%), Alternative Lending/Financing (17%) and Personal Finance/Wealth Management (11%).
54% of investment into the UK was from overseas VCs, largely based in North America (25%) and Europe (14%). This is consistent with previous years and shows that the UK remains attractive to outside investment, despite Brexit uncertainty.
Global VC investment into FinTech reached $14.4 billion across 1,824 deals globally, an 18% decrease yoy. However if the two China “mega-rounds” of Alipay and JD Finance – each over $1 billion – are excluded as “exceptional” from 2016 figures, global investment increased 19.4%.
The US was the global leader in terms of capital invested and deal volume, contributing three of the top five global deals (SoFi, Avidxchange and Kabbage). China, which was top in terms of capital invested in 2016, saw an 81% decrease in 2017 and dropped to third place with $1.6 billion invested in over 39 deals.
The top five global investors by number of investments were: 500 Startups (49 deals), YCombinator (38 deals), Startupbootcamp (31 deals), Techstars (21 deals) and Ribbit Capital (18 deals).
The 2017 FinTech VC Landscape Report is based on data compiled and validated by Innovate Finance using PitchBook.