FINTECH has proved to be the most lucrative sector for early-stage investors, with 63 per cent annual growth in the value of their investments over a seven-year period, new research shows.
This is more than double the 30 per cent compound annual growth rate (CAGR) seen in start-ups across all sectors, according to online investment platform SyndicateRoom.
The research, conducted in partnership with research firm Beauhurst, analysed the financial performance of early-stage investment into 519 UK start-ups between 2011 and 2017.
“The UK continues to be heralded as the world’s fintech capital,” the study said.
It said that online money transfer service TransferWise demonstrated the strongest growth in value over the period, not only for financial services but across all sectors, at a CAGR of 183 per cent.
The report also said that an investment of £10,000 into the cohort in 2011 would now be worth £63,848. Returns after EIS tax relief would have totalled £24,086, a return on investment of 237.45 per cent.
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“This cohort was worth just shy of £1.6bn in 2011, grew to £8bn in 2016 and now, just one year later, I’m delighted it is valued at over £10bn,” said Goncalo de Vasconcelos, chief executive and co-founder of SyndicateRoom.
“What’s more, the cohort has returned over £3.7bn to shareholders, demonstrating the long-term profitability of early-stage investing.”
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Businesses that exited via an initial public offering grew faster than businesses that exited via an acquisition, the report added. Companies that went to list on the Nasdaq grew in value by 98 per cent per year.
However, the research showed there are also risks involved in early-stage investing. 14 per cent of the cohort, equating to 73 companies, failed, meaning a total loss of value for investors. Education was found to be the worst performing sector amongst the cohort.