The fintech research programme at Clarus Investments has been expanded and is now tracking over 1,000 fintech companies started in the UK since 2009. In aggregate, as of the end of 2020, these companies represent approximately:
- Equity invested of £11 billion
- Valuation of £40 billion
- Employment of 48,000
- 2020 revenues of £5 billion
- 2020 losses after tax of £2 billion
Relatively few (around 5%) of the companies founded since 2009 have reached break-even but only 15% of the companies more than 3 years old have closed down. A further 19% of the companies more than 3 years old have not raised funding in the past 3 years and appear to be making little progress. Although 8% of this group of companies have achieved an exit, most of these exits were rescue transactions rather than profitable exits for shareholders. A few of the notable exits have been:
- B2C2: A crypto-currency trading platform which was acquired by SBI in December 2020 for an undisclosed value.
- Ebury: A global payments business in which Santander acquired a 50.1% shareholding in April 2020 for £350 million.
- PensionBee: A provider of pension aggregation services which achieved an IPO on the London Stock Exchange in April 2021, valuing the company at £365 million.
Establishing what the returns are to investors from publicly available data is extremely difficult. However, we have estimated that the average Internal Rate of Return (IRR) on paper for first round investors was somewhere between 50% and 75% after 5 years of operation. This takes into account investor losses incurred from companies which have closed or exited at little or no value.
While achieving profitability and a successful exit remains a challenge for most of the UK’s fintech start-ups, investment and valuation momentum continue to be strong. The first quarter of 2021 has seen a record level of investment, driven by some large rounds in later stage companies such as Starling Bank.
Further analysis is available from the research programme on each of the different fintech sub-sectors, and topics such as investor types and trends, and founder shareholdings.