The first half of 2023 sees a more than 50% decline in Canadian fintech investment.
In comparison to last year, investment in Canada’s financial technology industry decreased by more than half in the first half of 2023, according to a study released on Thursday by the accountancy company KPMG.
Startup valuations across the technological spectrum have been affected as investor appetite has soured due to high interest rates and concerns about an impending economic recession. This has caused a movement away from risky investments with a focus on profitability and towards safer investments.
“Investors are still quite concerned about the state of the global economy, with fears of a recession, elevated inflation and interest rates continuing to put a significant strain on valuations,” said Geoff Rush, partner and national industry leader for financial services at KPMG in Canada.
Data produced by PitchBook for KPMG in Canada shows that investments, including venture capital, private equity, and merger and acquisition activity, totaled $353.7 million across 57 deals during January to June 2023. There were no IPOs, continuing the previous year’s dry spell.
“We could see some stability coming back to financing markets by the end of 2023 or early 2024. Unfortunately, that timing may mean some more mature fintechs that have yet to achieve sustained positive cash flows may be facing very difficult choices by then, such as selling at down-valuation or simply shuttering,” said Georges Pigeon, a partner in KPMG in Canada’s deal advisory practice.
In contrast, $834.1 million was spent across 109 acquisitions in the first half of 2022. According to the study, $1.09 billion was spent in 87 acquisitions in the second half.
While a handful of fintechs have so far managed to conserve or stretch their capital this year, analysts point out that those that still need to seek money in the near future may do so at flat values and smaller rounds.
