Number of new FinTechs fall as investors hedge bets on established firms

Research by Claurus Investments has found investment in early-stage FinTech funding rounds is declining as investors begin to focus their capital on more mature companies.

The company researched all of the 1100-plus FinTech companies that have been founded since 2009 who had received at least one round of funding by the end of 2020.

These companies have raised £11.4bn between them and currently hold a total valuation of £86bn. Overall, the firms employ up to 57,000 people.

According to Claurus, only 150 of the top 1100-backed FinTechs examined will create any meaningful value – claiming that ‘we should not be surprised if the others disappear’.

The pre-season A funding for FinTechs peaked in 2018 at £265m. It was also founded that the yearly number of new firms founded in 2019 and 2020 was less than half of that in the years 2015 to 2018.

Claurus claims this indicates that the rate of new innovation has slowed with the focus of investors shifting to companies that are seen as long-term winners who are now attracted huge later-stage rounds.

For UK FinTechs that are at least three years old, 60% of them are continuing and have secured funding in the last three years. A further 18% are in operation but have not received funding in the last three years, while just 15% have closed.

The total revenues for the startups came to £5bn in 2020, however, Claurus said profitability ‘remains elusive’, as combined losses after tax were estimated at £2.2bn. Less than 5% of the companies are profitable, while 80% saw losses increase in the latest reported accounts.

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