The Fintech Financing and Performance Report is a unique analysis of fintech startups in the UK. The latest update of the report includes an increased sample size and data to the end of September 2018.
“We are at the early stages of the latest revolution in financial services. Fintech companies, and investors, can learn valuable lessons from the experiences of the sector’s pioneers as relative winners and losers emerge. Industry incumbents and other industry participants will also benefit from studying this research.”
The 66 companies in the sample represent nearly two thirds by value of the recent venture investment in fintech startups in the UK. They have raised a total of £3.0 billion, are valued at £10.1 billion, and have cumulative losses of £0.9 billion. A few relatively strong performers are emerging while others are finding it difficult to make progress. Highlights from the research are:
- Financial performance is weak – losses increased in the latest financial year for 74% of companies, some reduced their losses but were still loss making, and only 6 are breaking-even or profitable.
- Valuation performance is strong – the median increase in value per share from first round to latest round is 6.1x and the median IRR for first round investors is 86%.
- Funding rounds so far in 2018 have been at a median increase in value per share of 45%. However, the variance is high, and some companies are raising new funds with little or no uplift in value.
Our benchmarking analysis looks at the relative performance of companies at their different stages of development. For example, the companies operating at least six years and reporting revenues have required on average £258 of investment to generate revenue in the sixth year of £100.
The report also covers issues such as the value of founder shareholdings as companies progress through successive funding rounds. The highest value of shares retained by a founder is at Revolut where Nikolay Storonsky owns approximately 28% of the company, valued at £314 million.
Blockchain and cryptocurrency continue to receive a lot of interest. In the blockchain development sector, SETL has raised money at a very high valuation, including from corporate investors. In the cryptocurrency sector, Wirex is making good progress with its card and payments services.
“Companies in the fintech sector have introduced significant innovation. However, the continuing challenge is how to build sustainable businesses,” said Michael Pearson, founder of Clarus Investments. “We are at the early stages of the latest revolution in financial services. Fintech companies, and investors, can learn valuable lessons from the experiences of the sector’s pioneers as relative winners and losers emerge. Industry incumbents and other industry participants will also benefit from studying this research.”
About Clarus Investments
Clarus Investments was established in 2006 by Michael Pearson who is recognised globally as an expert on strategy and innovation in financial services. We conduct research and advisory projects on a range of strategic management subjects in developed and developing markets.