Venture capital (VC) investment has slowed considerably in the first quarter of 2018, according to a new study from advisory firm KPMG. VC investment in the first three months of the year rose just above $1bn (£705m), well short of the $2.8bn invested in the fourth quarter of 2017.
The dip follows a blockbuster 2017, when over $8bn was invested in the UK in multiple megarounds. The UK hosted seven of the top 10 European deals in the fourth quarter of last year. This year however, four of the top 10 deals took place in Germany.
Fintech remained the strongest performer this quarter, with London-based social trading and investing network eToro raising $100 million in order to fuel growth, pushing Britain’s VC over the $1bn mark. According to the report, the UK’s fintech market will continues to be a major player in the country’s VC investment.
“As the UK startup ecosystem has matured, a lot of later stage startups have shifted their focus from growth to profitability, particularly in the fintech space,” said Patrick Imbach, head of KPMG’s innovative startup practice. “Now we are seeing some fintechs succeeding; they are delivering on profitability objectives and positioning themselves for potential exit over the next one to two years.”
According to the report, the most significant fintech VC investments are likely to come in AI-related technologies as well as autotech and blockchain. Cryptocurrencies are also expected to gain more attention from investors in the near-term.
Still, despite the strength of the fintech sector, the first three months of the year has seen a considerable drop in the amount of UK investment, most likely due to continued uncertainty around Brexit. Imbach, however, remains optimistic: “Despite the trend in the number of deals in the UK continuing to drop, we can see that investors are clearly focused on making a smaller number of later stage deals.”