An update of the fintech financing and performance research was published in April 2019. Please go to the page “Fintech Financing and Performance Research“.
The Fintech Financing and Performance Report is a detailed analysis of fintech startups in the UK. The latest update of the report includes an increased sample size and data to the end of September 2018. The 66 companies in the sample represent, in value terms, nearly two thirds of the recent venture investment in fintech companies in the UK. They have raised a total of £3.0 billion, are valued at £10.1 billion, and have cumulative losses of £0.9 billion. A few relatively strong performers are emerging while others are finding it difficult to make progress, and the report looks at some of the critical success factors. Highlights from the research are:
- Financial performance is weak – losses increased in the latest financial year for 74% of companies and only 11% are breaking-even or profitable.
- Valuation performance is strong – the median increase in value per share from first round to latest round is 6.1x and the median IRR for first round investors is 86%.
- Funding rounds so far in 2018 have been at a median increase in value per share of 45%. However, the variance is high, and some companies are raising new funds with little or no uplift in value.
Our benchmarking analysis highlights the relative performance of companies at different stages of development. For example, the companies operating at least six years and reporting revenues have required on average £258 of investment to generate revenue in the sixth year of £100.
The report also looks at issues such as the value of founder shareholdings as companies progress through successive funding rounds. The highest value of shares retained by a founder is at Revolut where Nikolay Storonsky owns approximately 28% of the company, valued at £314 million.
There are a few companies in our sample with services based around blockchain or cryptocurrency. In the blockchain development sector, SETL has raised money at a very high valuation, including from corporate investors, indicating the strong interest in this sector.
“Companies in the fintech sector have introduced significant innovation. However, the continuing challenge for fintech startups is how to build sustainable businesses,” said Michael Pearson, founder of Clarus Investments. “We are still at the early stages of the latest revolution in financial services. New fintech companies, and their investors, can learn from the experiences of the sector’s pioneers as relative winners and losers emerge. Our research helps contribute to that learning.”