KPMG LLP in Canada released valuations data showing pandemic-level declines in investments in Canadian fintech companies in the first half of 2023. Investors are primarily concerned about current macroeconomic conditions and the looming shadow of recession, says an accompanying news release.
The data, compiled by PitchBook, shows that in the first six months of 2023, investments totalled US $353.7-million across 57 deals, down from $1.09-billion across 87 deals in the second half of 2022 and from $834.1-million across 109 deals in the first half of 2022 (all figures in US dollars).
In quarterly terms, investments in Canadian fintech totalled $297.3-million across 30 deals in the first quarter of 2023 but fell sharply to $56.5-million across 27 deals in the following quarter.
According to the release, there was a similar downward trend in venture capital (VC) investments, which totalled $260.1-million across 47 deals in the first half of 2023. Most of these deals were early-stage and seed-round investments, followed by late-stage funding rounds.
The VC investment numbers are down from $989-million invested across 65 deals in the second half of 2022.
The global fintech market faced similar challenges. Investments dropped to $52.4-billion across 2,153 deals in the first half of 2023, compared with $63.2-billion across 2,885 deals in the second half of 2022, according to KPMG International's latest Pulse of Fintech report, which is released every six months.
“We could see some stability coming back to financing markets by the end of 2023 or early 2024,” says Georges Pigeon, a partner in KPMG in Canada's deal advisory practice. “Right now could be good timing to launch a fintech startup as investors would be coming into the early financing rounds. At reasonable valuations, many investors have time to see their investment through, so it's a good opportunity for new fintechs to emerge.”
