In partnership with Dealroom, Netherlands-based VC Finch Capital has released a detailed analytical report, The State of European Fintech 2019 edition, revealing the drivers behind the strong value creation, the investors and the buyers of fintech over the last five years.
According to the report, fintech is Europe’s largest investment category (representing 20% of all global investments) and the sector is more active in Europe than in Asia and the USA. European investors dominate investments, with little role of non-European investors until a much later stage (Series C+). There’s a good mix between UK and continental European investors that lead the Seed and Series A/B stages with several new managers emerging since 2013 building on the fintech momentum.
“The report shows fintech proven to be more than a buzzword, creating €150 billion in value, many jobs, better experiences & products for European consumers,” said Radboud Vlaar, founding partner at Finch Capital. “The next wave of enabling fintech will be less visible but even more value accretive as it will tackle the inefficiency of the Financial Industry and can easily add another €150 billion in value.”
The report analyses four verticals of financial technology: banking & payments, insurance, real estate and enabling financial technologies. The strongest investment momentum over the past decade has been in banking & payments, but data shows it is shifting to enabling technologies like AI and IoT.
European fintech exits have totalled €83 billion since 2013, while the current pipeline of fintech startups valued over €1 billion is worth €45 billion (unrealised value). By both measures, European fintech companies have created twice as much value as any other sub-sector in tech in Europe. The exit landscape over the last years shows an interesting picture with only ±5% of the value of exits being realised via trade sales to traditional financial institutions. Based on the analyses, traditional financial institutions have not engaged in M&A above the €500 million mark, as incumbents cannot justify much bigger transactions, given they trade at 6-7x P/E and tech companies typically trade at 22-50x P/E.
Founded in Amsterdam in 2013, Dealroom is a global database providing insights on innovative companies and venture capital investment.
“Europe’s next €10 billion or even €50 billion startup could very well emerge out of fintech,” said Yoram Wijngaarde, founder and CEO of Dealroom. “The term fintech covers a vast space, from full-stack payment services like Adyen, to challenger banks like Monzo, to enabling tech like UiPath. With so much happening in the space, we’re excited to publish a comprehensive overview of the different areas of fintech, in partnership with Finch Capital, who know the space extremely well.”