UK FinTech seed deal activity falters in Q3 2023, more than halving YoY

Key FinTech seed deal stats in Q3 2023:
• UK FinTech seed deal activity reached 37 deals in Q3 2023, a 58% decline from the same period last year
• WealthTech was by far the most active FinTech subsector in the UK during the third quarter with 12 deals
• The average seed deal size saw no change YoY in Q3, remaining at $2.2m

UK FinTech seed deal activity recorded a worrying drop in Q3. In the third quarter of 2023, the number of UK FinTech seed deals amounted to 37, reflecting a 58% decrease compared to the same period in 2022. This is significant because based on FinTech seed deal activity in H1 2023, seed deals were projected 5.1% growth in Europe and the UK was the most active country in Europe during this period with 133 deals, averaging 66.5 deal per quarter. The third quarter results were 44% below this this average. In Q3, the average seed deal size remained constant YoY, staying at $2.2 million.

Vega, a wealth management platform, had the largest UK FinTech seed deal in Q3 2023 after raising $8m (£6.6m) in their seed round, led by Motive Ventures. The round also saw investment from Picus Capital, Citi Ventures, and No Label Ventures. The round also saw participation from over 60 angel investors, including senior partners from leading investment firms such as KKR, Blackstone, and Permira along with fintech executives with leadership experience at firms such as N26, Trade Republic, and Klarna. With this funding, Vega has emerged from stealth mode. It will use the funds to reshape wealth management. “As a new generation of high-net-worth individuals emerges, we are building the financial products and technological infrastructure the wealth management industry needs to serve them,” said Alexis Augier, founder and CEO of Vega. “Our goal is to provide a unified wealth management platform that transforms the experience for end-users while equipping advisors with institutional-grade solutions.”

Starting from August 1, 2023, the FCA’s (Financial Conduct Authority) Digital Sandbox, after two successful pilot phases, will become a permanent resource for a wider spectrum of innovative businesses, startups, and data providers. This innovative testing environment supports companies in the early stages of product development by facilitating experimentation through proof of concepts. Additionally, the permanent Digital Sandbox welcomes data providers to list their data on the platform, offering them valuable insights and exposure. Previously, this platform was only accessible to participants in pilots and TechSprints. Notably, the Digital Sandbox has proven to be a catalyst for innovation and growth, with more than half of SME participants from earlier phases achieving positive outcomes such as product launches, funding, partnerships, and industry recognition. This permanent Sandbox aligns with a broader strategy to promote economic growth and international competitiveness and offers a range of features including access to high-quality datasets and APIs, robust data security measures, collaborative tools, and an observation deck for interested parties to witness technical testing.

WealthTech was by far the most active FinTech subsector in the UK during Q3 2023 with 12 deals, a 32% share of total deals. RegTech was the second most active with seven deals, a 19% share of deals and InsurTech was third with four deals.

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