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US fintech funding and deal volume drop significantly in 2016

Total funding for US fintech companies and deal activity dropped significantly in 2016, down to USD12.8 billion from USD27 billion in 2015, a result of political and regulatory uncertainty, a decline in megadeals and investor caution.

That’s according to KPMG's Q4 2016 The Pulse of Fintech report, which reveals that despite the drop in total funding for US fintech, 2016 was the third strongest year for fintech investment and second highest year for venture capital (VC) fintech investment.
 
On a global basis, total fintech funding declined by almost 50 per cent, falling to USD25 billion in 2016 from USD47 billion in 2015.
 
Activity in the US – including M&A and VC investments – totalled 489 deals in 2016, down from 615 deals in 2015. Total VC investment in the US dropped to USD4.6 billion in 2016 from USD6 billion in 2015, while M&A activity fell to just USD8 billion in 2016, down from USD21 billion in 2015.
 
On a positive note, the median deal size increased year-over-year for both seed rounds and early-stage VC deals. In addition, massive late-stage fintech financings contributed to keep total deal value healthy.
 
"2017 is likely to be a pivotal year for fintech in the US and around the world," says Brian Hughes (pictured), co-leader, KPMG Enterprise Innovative Startups Network and national co-lead partner, KPMG venture capital practice. "Because valuations have corrected, the market has set up a perfect storm for IPOs and M&A to happen in 2017. An increasing number of exits will likely stimulate demand for new investments thanks to the dry powder already in the market." 

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