I took a contrarian view and said that FinTech investments worldwide would plateau in 2022. Interestingly, 2021 was a record year. Just looking at the figures from Innovate Finance, you can see things were still on fire:
Sector bounces back from pandemic – 217% overall YoY investment increase in the UK
Total capital invested in FinTech globally reaches $102bn – a 183% annual increase
Latest data from Innovate Finance reveals the UK remains second globally in FinTech investment, behind only the US
London, 6th January 2022 – New data released today by Innovate Finance, the industry body representing the UK FinTech industry, has revealed the 2021 global FinTech investment trends.
The UK has registered a record year in annual FinTech investment in 2021, exceeding $11.6bn – representing a huge 217% increase from 2020.
This correlates with the substantial global increase in investment levels, with the total capital invested around the world in 2021 standing at $102bn – a 183% YoY increase.
The majority (61%) of all global capital has been invested in later stage growth funding.
The UK’s $11.6bn total represents 11% of all global capital invested this year, which is a slight increase from the 10% figure in the previous two years.
The funds in the UK were spread across 713 deals, which marks 11% of all global deals (6,495).
Overall, the US leads the way globally, bringing in $46bn in FinTech capital, with the UK firmly in second place. The top five in the world were rounded off by India ($6.3bn), Germany ($4.4bn), and Brazil ($3.8bn).
Other key global and UK data insights included:
UK dominates the European scene – The UK is far and ahead the biggest FinTech draw in Europe for investors, followed by Germany ($4.4bn), France ($2.3bn), Sweden ($1.7bn) and the Netherlands ($1.6bn). Overall, $24.3bn was invested across the continent in 2021, with the UK representing nearly half (45%) of all investment.
Europe and Americas lead on mega deals – Amongst the global top 10 was Revolut from the UK. Amongst the world’s 234 mega rounds ($100m+), 32 were from the UK, equivalent to the whole of the rest of Europe (31) and behind the US (103 deals).
UK still lacking growth capital – The majority of funds backing UK companies went into early ($2.7bn) or late stage ($7.0bn) rounds, with a smaller share of funding at the growth stage level ($1.6bn). However, by number of deals, the Seed stage (<$1m) saw a decrease in funding whereas all other stages saw an increase compared to 2020.
The UK’s top deals – Amongst the UK’s top deals in 2021, the top five in size were represented by Revolut, Monzo, Copper, Checkout.com and Starling
Female funding gap persists – UK female FinTech founders received 9% of all capital invested, which is a 3.4x increase from 2020, but broadly the same proportion of the whole – representing a sustained level from 2020, and a drop from 13% in 2019.
The trends reveal that amongst FinTech verticals in the UK, payments, challenger banks, and digital assets were all active in raising capital in 2021 – testament to the diversifying and maturing FinTech space developing in the UK.
So, why am I bearish? I guess it comes down to a doubling of investment is unsustainable. After years of bullish growth, the angels, private equity and venture capital community will be taking a far harder and longer look at the pitches of FinTechs, both start-ups and developed companies. They will be asking harder questions like where is the growth coming from; what are you doing to create momentum; who is on the team and what is their background; how will you make your plans come to fruition?
I’m not saying it’s the end of FinTech or anything like that. What I am saying is that any FinTech who does have funding rounds ahead needs to prepare for far tougher questioning than they’ve ever had before.
2022 will prove interesting for those who succeed and ride out the year well, but I suspect that 2022 will also be the year that we weed out the weak.