Our research on the financing and performance of fintech startups in the UK has recently been updated with the latest available financial results for the sample of companies we cover. The number of companies in the sample is now 100, broadly spread across the range of different fintech verticals.

With all companies now having reported their 2018 financial results (apart from a few which are well overdue), we can see that operating performance is not improving. Only 1 additional company (iwoca) has moved into profitability, to add to the 4 companies that were already reporting profits. There are also 2 companies which are breaking even. The list of profitable companies is:

  • OakNorth
  • TransferWise
  • ClearScore
  • iwoca
  • LendInvest

iwoca is an interesting case. The company provides SME loans and has reached profitability in its 7th year of reporting. Revenues in Year 7 were £48m and cumulative losses up to this point have been only £15m. This contrasts dramatically with Funding Circle, another fintech pioneer of SME lending, which is still incurring substantial losses in its 9th year of operation and has cumulative losses of over £200m.

For the whole sample, 85% of companies reported increasing losses in their latest results and total losses after tax for the sample increased from £352m to £560m. Of course, we expect start-ups in their early years to have increasing losses so overall this is not a surprise.

Nevertheless, for the companies reporting for more than 5 years, 78% had increasing losses. A good example is remittance company World Remit which reported a loss of £45m in its 9th year of operation, up from £20m the previous year.

The median revenue growth in the latest year, for those companies which report revenues, was 64%. For those companies which have been reporting for more than 5 years, the median revenue growth was 52% and ranged from 135% for Onfido to a decline of 28% for ezbob. Typically, beyond Year 5 or 6, we see revenue growth rates dropping to 50% per annum and then down towards 25% per annum, even for successful startups.

For some of the older companies, revenue growth does not appear to be high enough to justify relatively high valuations. For example, Market Invoice (also an SME lender) reported 23% revenue growth in its 8th year of operation and had revenues of just £6m. Nevertheless, at its last round of funding in 2018 the company was valued at £76m.

Four of the companies in the sample have been put in administration: Osper, Loot, SETL and Glint Pay. The assets of Osper have been acquired and SETL has been restructured with part of the former operation continuing.

For more information on the research contact:
Michael Pearson
michael@clarusinvestments.com