Global venture capital (VC) investment continued to rebound in Q1 2025, increasing by 6.8% quarter-on-quarter (QoQ) to US$126 billion, according to a new report by KPMG. This growth was fueled by a wave of megadeals.

Despite the uptick in investment value, deal volume declined 7.5% QoQ to 7,551 deals. This decline was led by a number of investors pausing their investment activity to evaluate whether market shifts were temporary and to preserve capital in light of ongoing initial public offerings (IPOs) exit delays. Deal-making also slowed as firms adapted to evolving investment considerations.

Fintech showed continued strength in Q1 2025, especially in markets including Germany, Ireland, and Mexico, data from the report show. Following global trends, the sector was driven by large investments into matures ventures. It was also prominently featured among the top ten largest deals globally, represented by companies such as cryptocurrency exchange Binance, and payment processing firm Rapyd Financial.

Fintech as a top focus of VC investment in Mexico

In Mexico, VC investment fell quarter-over-quarter (QoQ) amid trade tensions with the US. These tensions prompted many VC investors to hold back from making investments in Mexico, and the broader Latin American (LatAm) region, while corporates with nearshoring plans and companies looking to potentially expand operations to Mexico hit pause.

At the sectoral level, fintech continued to be the focus of VC investment in Mexico. One notable transaction was the US$160 million Series A equity round secured by Plata, a credit and buy now, pay later (BNPL) company from Mexico. The deal brought the company’s valuation to US$1.5 billion and was the largest VC round in the country of Q1 2025.

Another prominent round was the US$66 million Series E extension raised by Uala in March, bringing the startup’s total for the round to US$366 million. The round was the biggest growth equity transaction in LatAm in the past three years. Uala is a leading LatAm neobank from Argentina that serves more than 8 million users.

Looking ahead, KPMG predicts that Q2 2025 could bring some consolidation to the fintech market in Mexico. Market leaders will likely strengthen their positions, while others will look for mergers to remain competitive.

Fintech VC remains strong in Germany

In Q1 2025, Germany defied global trends, recording a rise in overall VC funding. However, the total number of VC deals was incredibly low compared to historical norms, with many completed deals coming as follow-on investments from existing investors. Seed and pre-seed deals were particularly soft, driven in part by VCs looking to derisk their investments.

Despite uncertainties, fintech, artificial intelligence (AI) and deeptech, as well as defense remained attractive sectors to VC investors in Germany, as evidenced by notable transactions going towards players such as Solaris, and Hawk.

Solaris, a leading embedded finance and banking-as-a-service (BaaS) platform, secured a EUR 140 million financing round in February to support its operations and fuel its growth. Solaris serves customers including Samsung, Tomorrow, and Bitpanda.

Hawk, which specializes in AI-driven anti-money laundering (AML) services, raised a US$56 million Series C in April to support its ongoing product development and drive its global expansion. Hawk’s solution, which combines payment screening, AML transaction monitoring, and perpetual KYC, is used by more than 80 customers worldwide, including Ecobank, Worldline, and Synctera.

Ireland sees investment surge

At the other end of the spectrum, Ireland experienced its strongest quarter of VC investment in several years, driven primarily by large megadeals.

In Q1 2025, fintech continued to attract significant interest given their robust innovation ecosystems and strong talent base. Notable transactions included NomuPay’s US$37 million funding round, and Alt21’s US$12.5 million Series A.

Nomupay offers a unified payment platform that supports end-to-end payments through a single system integration. It aims to provide secure and flexible payment solutions tailored to the needs of high-growth regions in Southeast Asia, Middle East, and Europe.

Alt21 provides a digital hedging platform that helps companies protect themselves against currency risks. With technology used in high-frequency trading, the company automates the key steps in foreign exchange (FX), which aims to reduce operating costs.

KPMG warns that while Q1 2025 began on a positive note, the sentiment of VC investors in Ireland turned cautious towards the end of the quarter amid rising geopolitical uncertainties. These concerns could impact VC investment for the remainder of 2025.

Fintech, AI top financing ranking in Europe

Across Europe, fintech and AI dominated the largest funding rounds of Q1 2025.

Binance secured the largest round, raising a staggering US$2 billion in crypto investment. Binance is the world’s biggest crypto exchange.

Rapyd Financial secured the quarter’s fourth biggest round, raising US$500 million in March at a US$4.5 billion valuation. Based in the UK, Rapyd Financial is developing an international payments platform for businesses and consumers, facilitating bank transfers, digital wallet and bank transfers, and cash payments.

US IPO market sees setback

Finally, the KPMG report notes that the optimism surrounding a potential IPO rebound in Q4 2024 failed to materialize into Q1 2025. Concerns about tariffs and trade wars rose to the forefront, causing challenges across a number of stock markets globally and deterring IPO-ready companies from proceeding.

One relevant example was Klarna, a leading BNPL player from Sweden. In Q1 2025, the company made big moves towards a US-based listing, including forging a partnership with US-based OnePay to offer BNPL offerings to Walmart customers, and filing its IPO prospectus in March to go public on the New York Stock Exchange (NYSE).

However, Klarna halted its planned IPO in April, opting instead to wait for a more stable environment amid market volatility, people familiar with the matter told the Wall Street Journal.

KPMG predicts that should Klarna move forward and perform well in a more stable environment, other companies, particularly well-positioned fintech companies such as Stripe, Chime and Circle, could be encouraged to follow suit. This could revitalize the US fintech IPO market after a historically slow stretch for new offerings.

Featured image credit: edited from freepik