2020 the year that fintechs got more
The top ten funding rounds raised $4.10 billion a figure that represented 16% of all the money raised and invested in Europe over the first nine months of the year
As we noted yesterday, 2020 has been a bumper year for IPOs and for technology IPOs in particular.
It has, however, also been a very good year for fintech companies that are still in their formative stages or that prefer to remain in private hands regardless.
Fintech companies based in the USA and Europe have seen a 17% year over year growth in funding raised during Q3, bringing the total raised to $8.90 billion over the quarter up from Q2 2020’s total of $7.60 billion, according to data compiled by Yahoo finance.
Separately the State of European Tech Report published by Atomico Ventures shows that 2020 will be a record year for European tech funding and the report was full of positives for what has been a very trying year. Saying that: “2020 is on track to set a new record of capital invested into European tech. We are seeing a growing interplay in European tech between venture capital, private equity and the public markets, creating more M&A opportunities, a strong pipeline of future IPO candidates and a systematic recycling of experienced talent to build new generations of companies”
Against that, there have been fewer deals in Q3 2020 with 414 deals completed which was actually the lowest number of deals concluded since 2017 the inference here is that it was a case of quality over quantity. Looking back to Q1 and the start of Q2 2020 it’s a wonder that so many deals were done at all.
One of the biggest beneficiaries of the improving funding conditions in the latter stages of 2020 was US payments platform Stripe which raised $850 million in a Series G funding round that helped take its a valuation to $36.00 billion. A jump of almost $14 billion according to Pitchbook data.
In Europe, the Atomico report found that private funding was likely to hit $41 billion for the year and that 18 companies had attained the much sought after label of Unicorn status.
Funding highlights for the year included buy now pay later app Klarna which raised $650 million as well as currency transfer, payments app and proto bank Revolut which secured $580 million. Online auto sales site Cazoo raised $310 million whilst kitchen rental startup Karma Kitchen raised $317 million.
Atomico suggested that the success of European private funding rounds in 2020 has been bolstered by so-called mega-deals with the top ten funding rounds raising $4.10 billion a figure that represented 16% of the money raised and invested in Europe over the first nine months of the year.
Despite the positive performance in European private fundraising seen in 2020, the continent lags way behind the USA. Which saw $141 billion raised and invested in 2020. However, Europe is catching up with Asai which saw its private funding fall to $74.0 billion in 2020. Down sharply from the near term peak of $117 billion that was raised in Asia during 2018.
Atomico also highlighted that European seed rounds are rising in value with the average initial funding round securing $1.20 million up from just 0.70 million back in 2016. With average Series A rounds in Europe attracting $6.60 million up substantially from the 2016 average of $3.90 million seen in 2016.
There appears to have been a shortfall in series B funding in Europe in 2020, however, with what Atomico described as a: “ a noteworthy drop-off of $20-50m rounds” the venture cap house attributes this to changes in consumption and consumer behaviour bought about by the pandemic which meant that many businesses had to adjust their platforms and plans in response and may have decided to delay additional fundraising as a result.
The Atomico report suggesting that: “At Series B you’ve passed the stage where you’re raising off an idea; you’re having to raise from momentum and growth” and that “For a lot of companies, changes in user behaviour and enterprise spending impacted their growth trajectory”
London remains the hub for European tech and Fintech investing with $34.0 billion of funding having poured into London since 2016.
Well ahead of second-placed Paris which has seen $11.70 billion raised in the French capital since 2016, although 2020 was a record year for the city with $3.40 billion being raised by startups based there.