Investment in FinTech companies in the Nordics on course to decline this year, due to a few exceptionally large deals in 2017
- Last year saw record highs in the total value of investments overall which is yet to be replicated in 2018. Currently the amount invested so far this year is 37.8% of 2017’s level.
- The record-breaking last year was due mainly to a few large transactions including a £225m private equity round for Swedish payments company Klarna which accounted for almost 35% of the total funding.
- However, 2018 has also seen fewer large capital investments so far; two deals over $20m as compared to six in 2017. These two deals were completed by Lendify, a Swedish P2P lender, which raised $50.4m in debt financing and Peakon, a banking infrastructure platform based in Denmark, which raised $22m in a series B round.
- Not only has the value from larger capital transactions decreased but so has deal activity, which is currently on track to be significantly lower than both the previous years.
- One positive sign, however, is that the total value of funding rounds under $20m, which has been showing strong growth every year from 2014, looks set to reach the previous year’s total of $228.9m. The continued growth of capital from smaller deals is a testament to the strength of the FinTech ecosystem in the Nordics.
FinTech investment in Q3 2018 down almost 95% compared to same quarter last year
- The $225m private equity round raised by Klarna and iZettle’s $55.4m debt financing round accounted for 89.7% of the value of transactions in Q3 2017.
- However, even excluding these deals the total value of investments in Q3 2018 is approximately half that of Q3 2017.
- Adding to this, investments in Q3 2018 are less than the value of any of the four preceding quarters.
- Deal activity remains similar having only dropped by one deal from 11 in Q3 2017 to 10 in the third quarter of 2018.
- Q1 is the strongest quarter in 2018 so far with $178.7m worth of investment which accounts for more than 70% of the total capital raised this year. This was mainly because the two biggest deals as previously mentioned, with Lendify and Peakon, were completed in this quarter. In addition, this quarter also shows the highest number of deals, 24.
2018 has seen a noticeable decrease in the shares of Swedish deals in the Nordics
- The relative dominance of Sweden in the Nordics has markedly decreased in 2018. Sweden’s percentage as a proportion of total deal activity in the Nordics has dropped 19.0 percentage points (pp), from a share of over 60%.
- Every other country in the Nordics has seen their percentage of overall deal activity grow. The mean pp increase of total deal activity from 2017 for these other countries is 4.7%.
- Iceland easily remained the country with the smallest percentage share of deal activity. Although, it’s percentage share almost quadrupled, increasing from 1.1% in 2017 to 4.3% in 2018. Meninga, a banking infrastructure company, is the only Icelandic company to have held funding rounds in the millions since the beginning of 2017. In 2018, the company raised $7.3m from two venture rounds.
- The proportion of value invested in Sweden also had a significant percentage decrease of more than 30 pp. This can be explained by the lack of large deals in Sweden and resurgence of investment in Denmark, which had $40m more funding than last year.
- However, Sweden still holds the highest number of the top 10 FinTech Deals in 2018 with six transactions. Three of these deals, totalling $81.4m, were raised by Swedish P2P lending platform Lendify. The funding rounds from this company alone make up a third of capital invested in the Nordics in the first three quarters of 2018.
Infrastructure and Enterprise Software companies have received a quarter of all FinTech deals in 2018
- 25% of the 47 FinTech deals so far this year in the Nordics have been in the Infrastructure and Enterprise Software subsector. The second largest deal after previously mentioned Peakon was $7.4m raised by Zervant, a Finnish Invoicing company, in a series B round.
- Marketplace Lending has received just under a fifth, 19%, of total deal activity. This includes the biggest deal with Lendify, as previously mentioned, that has occurred this year.
- Payments & Remittances, WealthTech and RegTech have also attracted a healthy proportion of the total deals making up 11%, 13% and 15% respectively.
- Whereas the two smallest subsectors InsurTech and Real Estate together make up just 6% of total deal activity, with only three deals between them.
- The Other subsector includes companies that operate in Institutional Trading and Investing, Funding Platforms, Cryptocurrencies and Blockchain.
The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2018 FinTech Global