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European fintech in focus: fundamentals too strong

by Mike Galvin

The European fintech market has definitely proven in 2016 that it is all grown up.  While there may be some relationship issues thanks to Brexit, and a Q4 funding slowdown, the reality is that these challenges are just temporary since the fundamentals are too strong to slow the long term growth potential.  Even the fintech ‘children’ like insurtech and regtech are now getting a following of their own.

Many factors point to a healthy sector. The market leaders are now mature businesses and it’s likely we will see some major exits in 2017.  The big VCs are all actively investing in European fintech, and we have seen them joined by state funds such as International Finance Corporation  (Kreditech), and private equity such as Creades (Tink).

Corporates are super active on sponsorships and partnerships with the likes of incubators and accelerators. There is good early stage investment activity – such as CommerzVentures (Mambu, iwoca), Rakuten (Azimo, Kreditech), HSBC (Vizolution, Tradeshift). However, Europe is still is void of corporates actively acquiring growth companies like we see in the US.

In addition, the infrastructure and support network are now in place with the likes of Innovate Finance as a major advocate for fintech businesses.

And maybe most importantly, the next generation of innovative young companies are starting to grow.  Beyond the companies, we have profiled recently (Pockit, Yoyo Wallet and cfinancials), I’ve met with some great founders whose next wave of companies have the potential to be the fintech leaders of tomorrow.

  • Asset Vault:  allows its customers to catalogue all their physical and digital assets in one secure register so that they can catalogue, protect and unlock the value of their assets.
  • Rise Technologies: develops blockchain-inspired decentralised ledger solutions for multi-asset and multi-currency issuance, settlement and record-keeping.
  • Capitalise:  empowers SMEs and their advisors to find, compare and select the best lender from the wider market.
  • Railsbank: multi-product banking API (application programming interface) designed to connect banks and fintech companies in a simple, cost effective and compliant manner.
  • Swift:  mobile wallet service provider, providing white label mobile transaction platform solutions and a range of mobile wallet applications.

Over the past month we have researched and published detailed profiles on three up an coming fintech companies as part of our ‘Rated Company Profiles’ feature, Pockit, Yoyo Wallet, and cfinancials:

  • Pockit:   provides an online bank account to the unbanked, underserved and low income consumers, addressing up to six million people who are currently excluded by high street banks in the UK. It provides three elements – an online account comprising account number and sort code, a contactless MasterCard that can be used to pay online and on the high street wherever MasterCard is accepted, and a mobile app to help manage money in real-time and control spending using notifications.
  • Yoyo Wallet:  provides a personalised mobile payment platform with loyalty programmes and marketing offerings delivered to consumers based on their buying patterns. It helps retailers engage customers with contextual offers and digitalised loyalty programmes to increase purchasing frequency and customer retention, and offers consumers a convenient mobile wallet combining their favourite loyalty programmes, and receiving curated, personalised offers.
  • cfinancials: resolves the issue of transparency and reliable risk assessment for over 16 million global financial products. It does this by providing a way in which users can universally and objectively measure financial product risk and detect systemic and contagion risk on a scale of 1 to 100 by taking into account multiple market facts such as liquidity, volatility, correlation, price, fundamentals, product family, issuer and issuer news, history, coupon, maturity and structure.

During 2017, we are going to be increasing the number of fintech companies we are profiling each month, and showcasing specific sectors.

HTI research and commentary

Of course, no good review would be complete without the statistics.  For this article, we are focusing on fintech in 2016.  Based on our Go4Venture Headline Transaction Index (HTI), we observed the following:

  • Even though there was a general drop off at the end the year, fintech was the second strongest sector beyond internet services:

Volume of HTI fintech transactions per month 2016

Value of HTI fintech transactions per month 2016

  • Some of the general drop off in 2016 was due to the lack of some of the landmark deals (≥ €20m) such as those of Funding Circle, TransferWise and Stripe in 2015, but there were still some big rounds:
     

Top fintech deals in 2016

Fintech deals over EUR 20m in 2016

  • Although many of the investors are those you would expect, we have seen some new entrants in the likes of Ascot Capital Partners (UK), Convoy (HK) and Adveq (CH). Out of the 123 funds participating in large funding rounds for European fintech companies in 2016, 102 made investments in just one fintech company.

It is no surprise that Octopus Ventures, one of Europe’s largest venture capital firms, participated in and led the most investments in 2016 for European fintech companies. Total number of deals participated in was matched by e.ventures and Valar, both global venture capital firms. Horizons Ventures also had the highest number of deals led, followed by HPE Growth Capital, a private equity firm based in Holland, and Rakuten, a leader in internet services and global innovation headquartered in Japan, who both led rounds for Kreditech, namely the €10m series C extension in March 2016 and €10m late stage raise in December 2016 respectively.

The high level of activity (43 deals, valued at €834m) and attraction of top level investors and new participants in the fintech sector in 2016 shows the growing strength of fintech in Europe.

 

The Go4Venture Team

By |February 13th, 2017|Uncategorized|0 Comments

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