European fintech start-ups have raised $14.6bn in 544 deals so far this year, with seed and series A rounds accounting for nearly half of deals
European fintech start-ups have raised $14.6bn in 544 deals so far this year, with seed and series A rounds accounting for nearly half of deals
Fintech has flourished since the Global Financial Crisis in 2008. Yet the current downturn and reduced valuations have made venture capital firms more cautious about which start-ups they invest in and when to invest. Deploying capital to companies at an early stage offers them an opportunity to build out businesses during the recession, expand their operations, and create more competitive pan-European and eurozone-wide digital tools, growing toward an exit once macroeconomic and market conditions are more favorable.
In 2021, the shining star of European fintech was Sweden’s Klarna, which raised $639mn in a Series H round at a valuation of $45.6bn in July that year. However, the e-commerce payment solutions company fell victim to the decline in tech valuations and concerns about the economy and its lending model, and at its next $800mn round in July 2022 had a post-money valuation of $6.7bn.
Fintechs in Europe need to overcome language and cultural barriers if they’re to become regional and global players, but many are extending platforms into neighbouring countries with similar languages and cultures.
For example, Estonian ecommerce checkout solution Montonio and insurtech start-up Cachect, which raised €11mn and €5mn in series A rounds in 2022, respectively, operate in the Baltics, Poland and Finland. German online bank N26 offers its products in the DACH region (Germany, Austria, and Switzerland), Western Europe, the US, and Brazil, while Berlin’s Trade Republic has expanded its digital investment platform to western, southern and eastern EU member states. In addition, France’s Qonto bookkeeping, pricing, and payment transfer system serves SMEs and freelancers in Western Europe, while Italian payments company Scalapay has expanded into the southern and western part of the continent.
Preqin Company Intelligence’s dataset shows that European fintech start-ups raised $23.9bn in 619 deals in 2021. So far this year, they’ve raised $14.6bn in 544 transactions, with 143 seed and 97 series A rounds accounting for nearly half of deals. The UK has dominated the deal-making, with $7.5bn raised in 211 transactions, followed by France with $1.4bn from 44 deals, and Germany with $1.1bn from 62 deals.
Top 3 most active VC firms in European fintech start-ups
VC firms will continue to look for good investment opportunities among fintechs. In its October 2022 report, Europe’s Fintech Opportunity, consultancy McKinsey & Company noted that, despite declining valuations and more difficult access to financing, Europe’s fintechs were gaining in strength and relevance for customers and the economy. In all of Europe’s seven largest economies – France, Germany, Italy, the Netherlands, Spain, Switzerland, and the UK – at least one of the top five banking services institutions by market value is a fintech.
McKinsey is in no doubt about the scale of the opportunity. It wrote: “If fintech ecosystems in all European countries were able to attain the same level of performance as the best in the region, the upside could be substantial. The volume of funding would more than double to almost €150bn from €63bn and valuations would grow by a factor of 2.3 to almost €1tn.”
Power your deal-making with accurate and comprehensive private market data and intelligence on investor-backed companies. Get a complete view of the private capital lifecycle with interconnected company, fund and performance data. Find out more about Company Intelligence today.