Over the past few years, there has been a significant growth in C funding for the fintech sector. Bitcoin and blockchain companies have seen their fair share of investment capital as well. But a new study by CB Insights seems to indicate the VC funding space is hitting the proverbial glass ceiling. Concerns over high valuations and a lack of IPO exits are cause of grave concern.
Quarterly reports on VC funding are always a mixture of highs and lows. But in the Fintech sector as a whole, things are looking rather bleak for the time being. While US$2.5bn was raised by VC-backed Fintech companies in Q2 of 2016, this number is half of the amount raised in the same period last year.
This is in stark contrast to how overall funding is up to US$9.4m, spread among 374 business deals around the world. China is the driving factor for this boost, as Ant Financial alone accounts for US$4.5bn of overall funding. It looks like Chinese investors want to keep fingers in as many different pies as possible.
The Brexit is also leaving its mark in the UK fintech sector, although that was to be expected. Germany surpassed Britain for the first time regarding VC funding. Despite Asia’s mega deals, the total amount invested was well short of Q1 2016. Even North America saw its number of successful funding deals dip below the 100 mark.
It is worth noting the report indicates attention is shifting to co-creation opportunities. In doing so, larger firms invest more money in their in-house accelerators or innovation labs. Various financial institutions are doing so as of late, which is positive news for blockchain companies. Having a tight-knit relationship with a financial player is never a bad thing in the fintech world.
At the same time, these statistics are worrisome for Bitcoin and blockchain companies as well. If VC funding goes down, a lot of projects will struggle to come to fruition. At the same time, the number of good IPO exits in Bitcoin and blockchain is very limited, which is a factor that needs to be taken into account at all times.
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