KPMG: Canadian Fintech Investment Drops in 2022, Mentality Shift to ‘Sensible’ Growth

KPMG | Release | Feb 15, 2023

Investment in Canada’s fintech sector dropped last year, as valuations declined more than five-fold and the number of deals slowed significantly towards the end of the year. Despite the slowdown, it was still the second-best year for deal volume.

• 2022 highlights:  There were 169 fintech investments worth US$1.3 billion in Canada in 2022, down from a record 217 deals worth US$7 billion in 2021, according to data compiled by PitchBook for KPMG in Canada.
  • In H2’22, there were 68 investments worth US$439.9 million (down from H1’22 when there were 85 deals worth US$810 million)
  • The fourth quarter was the weakest quarter of the year, with 27 deals worth $154.8 million (down from the first quarter, which saw 41 deals worth US$285 million and the fourth quarter of 2021 which saw 52 deals worth US$956 million).
  • There were no (fintech) IPOs in Canada

  • Cryptoassets and Payments draw investors:  By sector, payments remained the hottest sector globally, while cryptoassets and blockchain companies garnered the most interest in Canada despite a year of volatility from the collapse of some stablecoins, cryptoasset exchanges and lenders.

See:  FIS Report: Embedded Finance, Web3 and ESG Lead 2023 Fintech Investment Focus

• Count by Deal type:
  • 57 seed round
  • 41 early-stage VC
  • 30 late-stage VC
  • 20 M&A
  • 9 angel investments
  • 7 buyouts/LBOs
  • 5 PE growth/expansion
• Investment Count by Sector
  • 51 Cryptoassets
  • 16 Payments
  • 15 RegTech
  • 12 InsurTech
  • 8 Proptech
  • 1 Cybersecurity
  • 1 WealthTech

See:  KPMG Fintech Pulse H1’22 Report: Global Fintech Investments $107.8B across 2,980 Deals

• Outlook for 2023: 

  • The slump in Canadian and global markets put downward pressure on valuations last year, a trend expected to continue this year.

    • A potential recession, rising interest rates and inflationary pressures are top of mind for investors, so we expect valuations and deal volumes to remain subdued through 2023, with a slight pickup near the end of the year

  • The fintech space is also undergoing a bit of a mentality shift from ‘growth at any cost’ thinking to focusing on sensible growth and cash preservation

    • In 2021, many companies saw a huge influx of capital from VC investors, so some of those firms won’t need cash until sometime in 2023 – maybe even 2024 – because they’ve streamlined and restructured their operations to make that cash last longer.

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