Venture capital has hit a plateau, according to some analysts.
“After $100M+ checks flowed freely to VC-backed companies through much of 2015, the mega-round trend has settled into a lower range through 2016,” concluded KPMG and CB Insights in their Q3 2016 venture capital report.
Data suggests the trend is global: North America VC investments for the quarter were fairly flat compared to Q2, and while Europe saw an increase in the number of deals for VC funding, there was a decline in the value of that collective funding. Even Asia is seeing a pullback from investors, the report found, finding that VC funding activity has “slowed down dramatically” since 2015.
There is evidence, however, that B2B startups endure with a strong pulse around the world.
Earlier this year, analysts told reporters that investors have begun to shy away from the copious population of B2C-focused FinTech companies.
“There is a trend away from consumer unicorns and valuations,” said Andreas Liffgarden, chairman and cofounder of Soundtrack Your Brand, a company that secured funding from top-tier investors like Spotify. The startup has focused on corporate clients, which often are willing to pay more for services than individual consumers, Liffgarden added.
B2B FinTech’s Time
As investors begin to look at startups with corporate clients in mind, FinTech startups, both B2B and B2C, are also muscling their way through the year with strong investment performances.
Last month, researchers at Roland Berger found that the majority of European FinTech startups are “active” in the venture capital space, and the majority of these companies operate on a B2B model. According to the report, 54 percent of these companies said the area of payments has the greatest potential — more than crowdfunding and alternative lending.
These businesses remain confident and realistic about their roles in the world, too. Researchers found that the vast majority of these firms believe they won’t replace existing traditional financial institutions, while most said they expect those players to become key competitors. Still, 86 percent said they’re planning to cooperate with those competitors to innovate and grow.
Like Europe, Asia is also seeing some promising performance from its FinTech startups.
Frost & Sullivan released its own analysis of the Asia-Pacific FinTech landscape last month and found that the market is expected to see a $70 billion increase in revenue from these businesses by 2020. With that in mind, investors want in.
“Asia-Pacific FinTech investment increased exponentially in 2015,” reflected Frost & Sullivan Vice President of Digital Transformation Ajay Sunder in a statement. Nearly half of the investment deals last year, he added, focused on payments technology and innovation startups.
Many of the focuses of these APAC FinTech startups, researchers found, have broad potential for B2B applications. For instance, blockchain, cybersecurity and digital payments are all top targets for investors, the report found.
For both Europe and Asia, 2016 was hardly a flop.
Accenture found that FinTech venture funding across the globe increased by 67 percent in the first quarter of 2016 compared to Q1 2015, with Europe and Asia seeing the most deals.
In its “Pulse of Fintech” report, KPMG and CB Insights concluded that 2016 may be headed for disappointment when it comes to FinTech funding, at least compared to what global markets saw in 2015. But with some analysis pointing to the promise of B2B FinTech, it’s possible that 2017 could be the industry’s time to shine when it comes to venture funding.
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