Covid-19 has led to an annual drop in fintech funding in the first half of 2020, but funding is still up from the second half of last year, new research has found.
Innovate Finance, the industry body representing UK fintech, found that investment in fintech during the first half of 2020 fell by over a third year-on-year, but this has risen by 22 per cent from the second half of 2019.
Venture capital investment dropped by 39 per cent from the first half of 2019 to reach $1.84bn (£1.67bn) between January and June this year. However, this still represents an improvement on the second half of 2019, when funding totalled $1.5bn.
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“It’s encouraging to see investors are still backing fintechs, particularly those which are accelerating the digitalisation of society,” said Charlotte Crosswell, chief executive of Innovate Finance.
“But we need to highlight the significant drop in the amount of capital raised during the first half of the year.
“This is particularly impacting start-ups, with a recent survey showing that 75 per cent of smaller fintech firms are concerned about their next funding round.
“Whilst early stage conversations suggest capital is ready and waiting to be invested, there is still a lag in actual funding.
“It is yet to be seen if the rest of 2020 sees a pick-up in activity, but in the meantime, we must help fintechs of all sizes source the capital they need to emerge from the pandemic, if our sector is to grow during the crisis.”
Over half of the funding to fintechs in the first six months of 2020 went to five companies: Revolut, Checkout.com, Starling Bank, Onfido and Thought Machine.
Just under half (47 per cent) of fintech funding was made up of mega deals ($100m), showing how the sector is now attracting more growth investors.
A fifth of the total funding in the first half of 2020 went to companies receiving between $5m to $20m, while the smaller raises of up to $5m made up eight per cent of all the investment.