KPMG Report H1 Canadian Fintech Funding: Echoes Early COVID-19 Days with Dramatic Investment Plunge

Canadian Fintech Funding | Aug 23, 2023

Source: PitchBook, KPMG in Canada

In 2023’s first half, Canadian fintech saw a significant three-fold decline in investments, reaching lows reminiscent of the early COVID-19 days, primarily due to economic uncertainties.

• KPMG in Canada reported investments of US$353.7 million over 57 deals, a stark contrast to the previous year’s figures. Geoff Rush of KPMG attributes this to an ongoing downward trajectory initiated in the prior year.
• Concerns about the global economy, including fears of recession and rising inflation, have caused investors to reevaluate their strategies, leading to a decline in Canadian fintech investments. As Mr. Rush states, “Investors are still quite concerned about the state of the global economy… causing them to pause and reflect on their current investments and strategies.”
• The first half of 2023 saw a significant drop, especially in Q2, which was one of the weakest quarters since 2016. However, Mr. Rush remains optimistic about future prospects, anticipating growth in areas like blockchain and AI, as many financial firms are keen on integrating emerging technologies.

What Can We Learn from the Deal Type and Investment by Industry Counts

• The majority of deals were early-stage and seed-round investments, indicating that investors are keen on funding young, innovative companies.
• Notably, there were no initial public offerings in the first half of 2023, continuing the trend from the previous year.
• Investor interest:
  • Crypto and AI Lead The leading sectors in fintech investments were cryptoassets/blockchain and artificial intelligence/machine learning.
  • Payments and Climatetech These sectors also saw some investments, though not as dominant as the former.
  • Regtech and Insurtech These sectors saw moderate investments, indicating a steady interest but not a booming trend.

Outlook

• While the first half of 2023 has been challenging for Canadian fintech, the industry is poised for a potential resurgence.
• As global markets adapt to the changing economic climate, areas such as blockchain, artificial intelligence, and machine learning are expected to gain traction. Investors and fintech startups should remain vigilant, capitalizing on emerging opportunities and navigating the challenges ahead with strategic foresight.

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org