THE 2016 VC

FINTECH
INVESTMENT
LANDSCAPE
February 2017
CONTENTS

SUMMARY 03

GLOBAL 08

UK 17

ANALYST SUPPLEMENT 27

APPENDIX 31

2|
SUMMARY

3|
Source: Pitchbook (as at 30/01/17) 4
|
 THE 2016 VC FINTECH INVESTMENT
LANDSCAPE – SUMMARY (1 of 3)

“China and the US dominate FinTech investment with a

combined $13.9 billion of the total $17.4 billion, 80% of the
global venture capital raised in 2016, and the top two ranked
future foreign investment sources for UK FinTech. Whilst UK
FinTech venture investment is down 33.7% in 2016 at $783
million, largely attributed to the uncertainty of Brexit and geo
political / macro economic factors, Q3 funding rebounded, and
9 of the top 20 deals completed in the 6 months following the
referendum, with the UK retaining its global ranking in third
place. The top three UK deals were Starling Bank (challenger
bank) at $101.0 million, iwoca (alternative finance) at $57.0
million and Nutmeg (robo advice) at $52.2 million

The loss of passporting rights will hit FinTech payments firms if

Lawrence Wintermeyer special provisions to the single market are not negotiated upon
CEO – Innovate Finance leaving the union. However, maintaining and further improving
access to global FinTech talent has superseded passporting
across the FinTech community’s post-Brexit priorities. Over
30% of Innovate Finance FinTech founders and CxOs are non-
British with many employing European staff. Attracting further
investment to UK FinTech remains the number one priority
”

Source: Pitchbook (as at 30/01/17) 5

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 THE 2016 VC FINTECH INVESTMENT
LANDSCAPE – SUMMARY (2 of 3)
 2016 saw 1,436 deals globally, attracting $17.4bn of VC investment, a 10.9% increase on 2015

 China attracted the largest amount of VC investment at $7.7bn over 28 deals, an 84% increase on 2015
investment of $4.2bn, outpacing the US for the first time

 US investment decreased in 2016 by 12.7% to $6.2bn despite being the global leader in deal volume at 650 deals

 3 “mega-rounds”, each over $1bn, contributed to the significant increase in 2016 VC investment into China:
 Alipay (Ant Financial) – $4.5bn (the biggest FinTech VC round in history)
 Lufax.com – $1.2bn
 JD Finance – $1.0bn

 The most active global investor in 2016 was the seed fund and start up accelerator 500 Startups with 39
investments

 Accelerators Startupbootcamp and Techstars were also amongst the most active global investors, with 36 and 30
investments respectively

 There were no notable FinTech IPOs globally in 2016. The top global exit was the Markit’s (UK) $5.5bn merger
with IHS (US)

Source: Pitchbook (as at 30/01/17) 6

|
 THE 2016 VC FINTECH INVESTMENT
LANDSCAPE – SUMMARY (3 of 3)
 The UK attracted $783m of VC investment, down 33.7% on 2015. The UK ranked third globally in total investment
behind China and the US, and second in terms of deal volume with 173 deals

 The UK VC investment CAGR dropped from 58% during the period of 2012-2015 to 33% during the period of
2012-2016

 Q2 2016 investment slowed dramatically compared to Q2 2015, which many in the community attribute to the
general uncertainty in the run up to the Brexit referendum on 23rd June 2016

 However, 8 of the top 20 deals closed post-Brexit, with the post-Brexit investment totaling $368m, just under half
of the total UK investment for 2016

 Q4 also underperformed by 39% compared with same period in 2015, which many have attributed to the macro
uncertainty

 Starling Bank, iwoca, Nutmeg, SETL and BillFront led the top 5 top UK deals in the range of $35m to $100m of
investment. Starling was the only UK FinTech to make the global top 20 deal list, with an angel round of $101m

 The 3 biggest FinTech verticals for UK investment were Alternative Lending / Financing (24%), Challenger Banks
(20%), Wealth Management (10%) and Money Transfer & FX (10%)

 46% of investment into the UK was from non domiciled VCs, largely coming from Europe (19%) and US (18%)

Source: Pitchbook (as at 30/01/17) 7

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GLOBAL

8|
 GLOBAL FINTECH VC INVESTMENT -
5 YEAR TREND
 2016 has seen 1,436 deals globally attracting $17.4bn of VC investment, a 10.9% increase YoY

1.800
1.617
-11.2%
20.000
1.600
1.420 1.436
1.400

15.000 1.200
Deal value (USD M)

1.036

Deal volume
1.000

10.000 699 800

17.355
15.648 10.9% 600
11.873
5.000 400

6.252
200
2.581
0 0
2012 2013 2014 2015 2016

Deal value Deal volume

Deal value 5 year CAGR: 46.4% Deal volume 5 year: CAGR: 15.5%

Source: Pitchbook (as at 30/01/17) 9

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 QUATERLY GLOBAL FINTECH VC -
INVESTMENT (Q1 15 – Q4 16)
 In 2016, global investment increased YoY in every quarter except Q3

12.000 500
453
450
416 414 416
10.000
366 371 400

324 350
8.000
Deal value (USD M)

300

Deal volume
293
6.000 250
87%
200
-70%
4.000
132% 7.195 7.083 12% 150

5.317
100
2.000 3.848
2.428 2.714 50
2.290 2.128

0 0
Q1 Q2 Q3 Q4

2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume

Source: Pitchbook (as at 30/01/17) 10

|
 GLOBAL FINTECH VC DEAL VALUE
2016

U.K.
$783m
Canada
$183m
Ireland
$524m Germany
$384m
U.S. Japan
$6.2bn $87m

Israel China
$173m $7.7bn
Mexico
$72m Hong Kong
$170m
India
$272m

Singapore
$86m

Brazil
$161m

Australia
≥ $500m $91m

≥ $100m

≥ $10m
$17.4 billion invested over 1,436 deals
Source: Pitchbook (as at 30/01/17) 11
|
 GLOBAL FINTECH VC DEAL VOLUME
2016

U.K.
173
Canada
37
Ireland
Germany
17
France 50
U.S.
650 31

Israel China
27 28
Mexico
21

India
82

Singapore
41

Australia
≥ 50 27

≥ 20

≥5 1,436 deals in 66 countries

Source: Pitchbook (as at 30/01/17) 12
|
 GLOBAL FINTECH VC INVESTMENT -
TOP 10 COUNTRIES (2015 vs 2016)
 China, for the first time, attracted the most investment at $7.7bn over 28 deals, beating the US
which attracted $6.2bn over 650 deals

Top 10 countries by deal value ($M) Top 10 countries by deal volume

7.730 650
China United States
4.203 764
6.182 173
United States United Kingdom
7.082 164

783 82
United Kingdom India
1.178 69

524 50
Ireland Germany
97 33

384 41
Germany Singapore
108 2016 2015 36 2016 2015
272 37
India Canada
1.690 41

183 31
Canada France
150 36

173 28
Israel China
43 55

170 27
Hong Kong Australia
125 32

161 27
Brazil Israel
34
87

Source: Pitchbook (as at 30/01/17) 13

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 TOP FINTECH VC DEALS 2016
 Top global FinTech VC deals

Country: Country: Country: Country: Country:

Capital Consumer
Sector: Payments Sector: Sector: Sector: Capital Markets Sector: InsurTech
Markets Finance

Date: 26-Apr-16 Date: 15-Jan-16 Date: 16-Jan-16 Date: 31-May-16 Date: 22-Feb-16

Series: B Series: Undisclosed Series: A Series: Undisclosed Series: Undisclosed

Size: $4.5bn Size: $1.2bn Size: $1.0bn Size: $400m Size: $400m

 Top UK FinTech VC deals

Country: Country: Country: Country: Country:

Challenger Wealth
Sector: Sector: Alt Financing Sector: Sector: Blockchain Sector: Alt Financing
Banks Management

Date: 11-Jan-16 Date: 04-Oct-16 Date: 14-Nov-16 Date: 15-Jul-16 Date: 14-Dec-16
Series: Angel Series: C Series: D Series: Angel Series: A

Size: $101m Size: $57m Size: $52m Size: $40m Size: $35m

Source: Pitchbook (as at 30/01/17) 14

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 GLOBAL FINTECH INVESTMENT RANKING
2016
 Starling Bank was the only UK deal in the top 20 global deals. 500 startups was the most
active global investor by number of investments

Top global deals by deal value ($M) Most active global investors by deal volume

AliPay (China) 4.500 500 Startups 39

Lu.com (China) 1.200 Techstars 36
JD Finance (China) 1.013 Startupbootcamp 30
ION Trading (Ireland) 400 Y Combinator 21
Oscar (US) 400
FinTech Innovation Labs 18
51credit.com (China) 394
Plug and Play 17
QuarterSpot (US) 237
Digital Currency Group 13
Solar Mosaic (US) 220
Khosla Ventures 11
PowerPlan (US) 212
UK deal Omidyar Network 9 HQ in the UK
Payoneer (US) 180
Index Ventures 9
WeLab (Hong Kong) 165
Founders Fund 9
Weidai.com (China) 153
Stripe (US) Accel Parters 9
150
LendUp (US) 150 Ribbit Capital 8
PaySimple (US) 115 QED Investors 8
Zibby (US) 103 Point Nine Capital 8
Kreditech (Germany) 103 Peter Thiel 8
Starling Bank (UK) 101 Nyca Parters 8
LendingHome (US) 100 MassChallenge 8
DPO Group (Ireland) 100 FoundersClub 8
Affirm (US) 100 Financial Solutions Lab 8
Betterment (US) 100 Fenway Summer Ventures 8

Source: Pitchbook (as at 30/01/17) 15

|
 TOP FINTECH M&A DEALS 2016
 Top global FinTech M&A deals

Merger with Sale to Sale to Sale to Sale to

Qingdao Haili Metal

One Co Ltd

EV: $5.5bn EV: $2.35bn EV: $1.5bn EV: $725m EV: $463m

Sector: Data & analytics Sector: Payments Sector: Payments Sector: Capital Markets Sector: Payments

Date: 12-Jul-16 Date: 01-Apr-16 Date: 01-Jul-16 Date: 12-Sep-16 Date: 27-Jan-16

Advisor: Multiple Advisor: Multiple Advisor: BofA ML Advisor: Evercore Advisor: Unknown

 Top UK FinTech M&A deals

Merger with Sale to Sale to Sale to Sale to

EV: $5.5bn EC: $174m EV: $40m EV: $33m EV: $20m

Sector: Data & analytics Sector: Enterprise Software Sector: Capital Markets Sector: Payments Sector: Payments

Date: 12-Jul-16 Date: 27-May-16 Date: 10-Jun-16 Date: 23-Dec-16 Date: 08-Jan-16

Advisor: Multiple Advisor: Quayle Munro Advisor: Quayle Munro Advisor: Deloitte Advisor: Deloitte

Source: Pitchbook (as at 30/01/17) 16

|
UK

17 |
 UK FINTECH VC INVESTMENT -
5 YEAR TREND
 2016 UK VC investment by deal value was down 33.7% at $783m vs $1.2bn in 2015

1.600 200

5.5% 173 180

1.400 164
160
160
1.200
140
Deal value (USD M)

1.000
120

Deal volume
96
800 100

80
600 63 1.180
500 60
-33.7%
400 783
727
40
200
20
191 227
0 0
2012 2013 2014 2015 2016

Deal value (USD M) Markit Deal volume

Deal value 5 year CAGR: 32.6% Deal volume 5 year: CAGR: 22.4%

Source: Pitchbook (as at 30/01/17) 18

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 QUATERLY UK FINTECH VC INVESTMENT
(Q1 15 – Q4 16)
 In 2016, UK investment decreased YoY in every quarter except Q3

800 70
65

700
60

51
600
50
44
Deal value (USD M)

500 45

Deal volume
40
34 34
400 -14%
30
34 30
-39%
300

-61%
20
200 0.0% 387
344 318
295
236 10
100
123 129 129

0 0
Q1 Q2 Q3 Q4

2015 Deal value 2016 Deal value 2015 Deal volume 2016 Deal volume

Source: Pitchbook (as at 30/01/17) 19

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 UK FINTECH VC DEALS BY VERTICAL -
(2015 vs 2016)
 Alternative Lending / Financing remains the top trend in 2016

2016 UK VC investment by vertical UK VC investment by vertical - 2015 vs 2016

(% deal value) (% deal value)

Financial 29%
Alternative Lending / Financing
Capital RegTech; inclusion;
34%
Markets; 3% 3% Challenger Banks
20%
Cyber 12%
2% Challenger
security; 10%
Banks; Money Transfer & FX
2% 25%
Wealth 20%
10%
Management; Wealth Management
12%
10% 6%
Money Digital Currencies & Blockchain
0%
Transfer &
6%
Enterprise FX; 10% Crowdfunding 2016 2015
4%
Software;
6%
5% Payments
4%
Payments; 5%
6% Digital Enterprise Software
1%
Alternative Currencies &
3%
Lending / Crowdfunding; Blockchain; RegTech
0%
Financing; 6% 6% 3%
Financial inclusion
29% 0%
2%
Capital Markets
5%
2%
Cyber security
1%
Top trends 0%
Data & Analytics
2%

Source: Pitchbook (as at 30/01/17) 20

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 UK FINTECH INVESTMENT RANKING -
2016
 There were 9 Innovate Finance members within the top 20 UK deals. Techstars & FinTech
Innovation Lab were the UK’s top investors

Top UK deals by deal value ($M) Most active UK investors by deal number

Starling Bank 101,0

Techstars 8
iwoca 57,0
Nutmeg 52,2 FinTech Innovation Lab 8
SETL 39,5
BillFront 35,0 Startupbootcamp 7
Tandem 31,9
Sonovate 28,9 Entrepreneur First 6
Ezbob 28,5
TransferWise Passion Capital 5
26,0
LendInvest 25,0
Octopus Labs 5
Property Partner 22,6 Innovate Finance
Sonovate member
17,3 Balderton Capital 5
Digital Shadows 14,0
Azimo 13,4 Global Founders Capital 4
OpenGamma 13,3
Flypay 13,3 Seedcamp 3
GoCardless 13,0
Crowdcube 10,5 Index Ventures 3
WeSwap.com 10,0
Dawn Capital 3
Payleven 10,0

Source: Pitchbook (as at 30/01/17) 21

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 UK FINTECH VC INVESTMENT -
POST BREXIT ROUNDS
 9 of the Top 20 UK deals closed post Brexit, with total post Brexit investment of $368m

57,0
52,2

39,5
35,0

17,3
13,3 13,3
10,0 10,5

Date Jul-16 Jul-16 Aug-16 Oct-16 Oct-16 Oct-16 Oct-16 Nov-16 Dec-16

Series B Angel n/a C D A B D A

Money
Crowd- Alt Lending / Alt Lending / Wealth Alt Lending /
Vertical Transfer & Blockchain RegTech Payments
funding Financing Financing Management Financing
FX

Source: Pitchbook (as at 30/01/17) Note: The Brexit vote was on the 23rd June 2016 22
|
 UK FINTECH INVESTOR HQ LOCATIONS
(2015 & 2016)
 46% of investment into the UK was from non domiciled VCs, down from 53% in 2015. 2016
investment outside of the UK was largely from Europe (19%) and US (18%)

2016 UK FinTech Investor HQ Locations UK FinTech Investor HQ Locations - 2015 vs 2016

Other; 54%
Middle East;
1% Unknown; United United Kingdom
1% 47%
4% States*;
18%
18%
Asia; 3% United States*
25%
Europe;
19%
19% Europe
16%

3%
Asia
5%

1% 2016 2015
Middle East
3%
United
Kingdom; 1%
54% Other
1%

4%
Unknown
3%

Source: Pitchbook (as at 30/01/17) * United states includes Bermuda 23

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 UK FINTECH VERTICAL ANALYSIS -
5 YEAR TREND
 The top five verticals in the UK have seen reduced deal size in 2016 in comparison with 2015

450
395
400
350
Deal value (USD M)

298
300
250 230 219
200 158
130 138
150
100 73 59 77 78
44 51 48 45 55
28 39
50 24 21 15 12 17 23
9
0
Alternative Lending / Payments Money Transfer & FX Capital Markets Wealth Management
Financing

450
400
350
Deal value (USD M)

300
250
200
145 158
150
100
46 43 36 42 43 43 38
50 29 23
4 10 10 8 6 7 13 8 11
0
Data & Analytics* Digital currencies & Crowdfunding Challenger banks Enterprise software
blockchain

2012 2013 2014 2015 2016

Source: Pitchbook (as at 30/01/17) 24
| *Data & Analytics figures exclude Markit VC round of $500m in 2013
 UK ACCELORATOR FINTECH COHORT -
TREND ANALYSIS (2014 – 2016)
 RegTech was the most common vertical in 2016, with Digital Currencies and Blockchain the
top verticals in both 2015 and 2016

2014 2015 2016

Enterprise
software RegTech
24% 25%
Payments
17%

Data &
Analytics Wealth
24% Management
17%

Data &
Analytics
17% Digital Currencies
Digital Currencies
and Blockchain and Blockchain
18% 17%

Notes:
1) Includes Barclays / Techstars, Startupbootcamp and FinTech Innovation Lab
2) % |represent number of cohort companies in a vertical compared with the total cohort companies in that year 25
UK EQUITY CROWDFUNDING FINTECH
INVESTMENT 2016
 UK equity crowdfunding investment into FinTechs totaled $37.9M in 2016, with 45% invested
into crowdfunding platforms

Key statistics Equity crowdingfunding investment by FinTech vertical

Capital
Markets; Data &
Digital 1% Analytics;
FinTech deal value $37.9M Currencies & 1% InsurTech;
1%
Blockchain; 4%

Crowdfunding
Challenger Platforms;
Banks; 13% 45%
FinTech deal
18
volume

Money
Transfer &
Average % raised FX; 14%
vs goals
140% Wealth
(FinTech Management;
Companies) 22%

Source:
Note: Includes Crowdcube, Angels Den, Envestors, SyndicateRoom, Seedrs 26
|
 ANALYST
SUPPLEMENT

27 |
 2016 GLOBAL VC FINTECH INVESTMENT
LANDSCAPE – ANALYST SUPPLEMENT
Investors

 The most active FinTech investor in 2016 was the seed fund and start up accelerator 500 Startups with 39
investments. In June 2016, 500 Startups announced it was raising a $25m FinTech fund to invest in ~100 early
stage companies globally

 Accelerators Startupbootcamp (UK based) and Techstars (US based) were also amongst the most active global
investors, with 36 and 30 investments respectively. Startupbootcamp has FinTech accelerators in London,
Mumbai, New York and Singapore. Techstars has partnered with Barclays and has FinTech accelerators in New
York, London and in 2016 launched programs in Tel Aviv and Cape Town

Exits

 In contrast to 2015, which saw two large FinTech IPOs (Square and Worldpay), 2016 did not see any notable
FinTech companies IPO, with several companies postponing them (e.g. SoFi, Elevate Credit Inc.)

 2016 Exits were realised through M&A via trade or private equity. The largest exit was UK based data & analytics
company Markit’s merger with US based IHS for $5.5bn

 FinTech M&A activity is likely to increase in 2017 as the number of mature FinTech companies in the market
increases

Source: Pitchbook (as at 30/01/17) 28

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 2016 UK VC FINTECH INVESTMENT
LANDSCAPE – ANALYST SUPPLEMENT
Investors

 The top investors in the UK were Techstars and FinTech Innovation Labs – both US domiciled accelerators with
specific London FinTech cohorts

 46% of investment into the UK was from investors not domiciled in the UK, the largest of these being Europe at
19% and the US at 18%. Within Europe, large amount of investment from France and Germany – other notable
FinTech hubs

UK accelerators

 25% of the London FinTech accelerator cohorts in 2016 were RegTech companies, supporting the prediction that
RegTech will emerge as an important FinTech vertical in 2017

 Blockchain is also a top vertical (17% of the cohorts in both 2015 & 2016), indicating that this technology is still
receiving investment and development attention on the path to wider industry application and adoption

Equity crowdfunding

 Equity crowdfunding is performing not only as a strong and stable asset class in its own right, but also a growing
vertical in the alternative finance industry

 $37.9m was raised by FinTechs across platforms in 2016, with crowdfunding platforms raising 45% of the total
FinTech investment through platforms. As the sector matures, we are more than likely to see other verticals
seeking to capitalise on this new fundraising method
Source: Pitchbook (as at 30/01/17) 29
|
 2000+ ATTENDEES
300+ FINTECHS
100+ SPEAKERS

M aria Gotsch
Rajesh Agrawal Giles Andrews Ian Dyson President and CEO of the
Deputy Mayor of Co-Founder & Executive Comm isoner Partnership Fund for
London for Business Chairman, Zopa City of London Police New York City

Bret t King Céline Lazort hes Steel M ohnot Jens Spahn

CEO of Moven and Host of Founder and CEO Partner, 500 Startups Parliam entary State
10 t h - 11t h April 2017 Breaking Banks Leetchi & MANGOPAY Secretary Federal Ministry
of Finance, Germany
Guildhall, London

Ticket s available now at £795 For the full speaker list go to w w w.ifgs2017.com

Platinum Sponsor Lead M edia Partner

| 30
APPENDIX

31 |
APPENDIX I: VERTICAL DEFINITIONS
 Alternative Lending / Financing – P2P lending, invoice financing, SME financing, e-lending platforms, credit
scoring
 Capital Markets – innovation relating to primary issuance, securities trading, M&A, trade and advisory services
in a B2B
 Challenger Banks – new digital banks that are challenging the large established High Street banks
 Crowdfunding – platforms that allow investment for projects / companies / property
 Cyber Security - technology designed to protect companies infrastructure from attack, damage or
unauthorised access
 Data & Analytics – analysis of data within the financial industry to support data driven decisions
 Digital Currencies & Blockchain – digital ledger technology, in which transactions made in bitcoin or digital
currency are recorded chronologically and publicly
 Enterprise Software – software solutions for financial service industry
 Financial Inclusion – delivery of financial services to the unbanked / unbankable
 InsurTech – technology applied to the insurance industry
 Money Transfer & FX – money transfer, international remittance & currency conversion
 Payments – innovation in payments, including cashless, online / ecommerce, mobile, B2B, merchant / POS,
wallets, P2P, recurring
 RegTech – technology applied to resolve issues regarding regulation within the financial industry
 Wealth Management – innovation within pensions, savings, personal financial management, investment
platforms and management of personal assets and investments (e.g. robo-advisors)

32
|
APPENDIX II: METHODOLOGY
 VC deal value figures include the deal types:
- Angel
- Accelerator / incubator
- Crowdfunding
- VC (all rounds)
- Private Equity (Growth/Expansion rounds only)
 VC deal value figures include all deals completed or announced (verified to press releases) in 2016
 Deal volume figures include deals without a disclosed deal value
 UK VC deal value represents investment into FinTech companies which are Head Quartered in the UK

33
|
END

34 |