New research reveals a maturing European fintech landscape as more growth companies have access to late-stage funding now than ever before.
This according to The State of European FinTech: Current trends and predictions, a report from Magister Advisors and Innovate Finance.
While the number of investment rounds exceeding $20 million have increased in Europe, increased investor interest has pushed valuations higher, with multiples often significantly above publicly traded established players.
Average deal size has been trending upwards since 2012 – the only notable exception being in 2016, which could be explained by the EU referendum vote in the UK.
However, Europe has yet to see a venture capital-backed initial public offering (IPO). On the up-side, multiple factors point to future increase in M&A activity. The report argues that because capital invested into fintech will require a path to liquidity, private investors will continue focusing on M&A exits until public investors show appetite for fintech IPOs.
There also has been a sharp increase in corporate interest and investment in fintech, as late-stage fintech are increasingly being funded by corporates. Nearly half of larger fintech funding rounds in 2017 saw corporate participation.
Some of the most active corporate investors in European fintech, which have core businesses outside of financial services include Tengelmann, ProSieben (Seven Ventures), Intel Capital, Salesforce.com.
“The report clearly shows fintech in Europe is ‘growing up’ with a sharp increase in companies able to raise large rounds, and growing interest from a broad range of corporate investors. Both trends set the stage for high-value M&A exits in the sector over the next few years” noted Victor Basta, founder and managing director of Magister Advisors.
Investment into fintech business-to-business (B2B) companies has increased. In 2017, nearly half of the capital invested in FinTech has gone to B2B, according to Pitchbook data. This is due to many factors, including regulation, increased collaboration and emerging technologies.
“The results of the joint Magister Advisors and Innovate Finance report reaffirm a robust and growing European FinTech ecosystem,” says Charlotte Crosswell, CEO of Innovate Finance. “Unlocking liquidity for FinTech M&A exits or IPOs will be a key issue in our ecosystem as FinTech enters its more mature phase.”