A recent report from market research company CB Insights suggests that start-ups operating in the high-on-buzz financial services space raised less money in 2019 compared to what they did in 2018, though this doesn’t necessarily mean that FinTech as a business was going out of fashion any time soon.
For, the Money Tree report compiled by CB Insights in partnership with PwC suggests that venture capital was just shifting from early stage start-ups to enterprises that were at an advanced stage as well as others that were operating in developing markets.
The report says that start-ups in the FinTech spaces raised $33.9 billion across 1,912 deals last year as against $40.8 billion that they raised through 2,049 deals in 2018 suggesting that in terms of individual deal sizes, the average wasn’t all that different from a year ago.
In fact, the report concluded that there was a broader struggle for early stage start-ups over the year with those seeking to close seed funding or Series A declined to a five-year low with all the money going to Series B funding, which recorded a five-year high during the same period under review.
Moreover, there was a focus on emerging and frontier markets for most of the VC action with countries in South America, Southeast Asia, Africa and Australia emerging with more funds than they had received in the 12 months of 2018. In fact, Asia outpaced Europe in the second half of 2019 in terms of deal numbers and capital raised.
“In Q3, European start-ups raised $1.6 billion through 95 deals, compared to $1.8 billion amassed by Asian start-ups across 157 deals. In Q4, a similar story was at play: European start-ups participated in 100 rounds to raise $1.2 billion, compared to $2.14 billion raised by Asian start-ups across 125 deals,” the report said.
The report also concluded that there was no way FinTech was going out of fashion any time soon by stating that 24 new unicorns emerged in 2019 that include eight start-ups that attained the status in the fourth quarter of the year. These included Ripple, High Radius and Next Insurance.
While start-ups in the insurance space got a big boost over the past 12 months raising $6.2 billion as against $3.2 billion a year ago, those in the solutions space such as invoicing and taxation for the SMBs were in demand with start-ups raising $4 billion in the United States alone for such ideas.
What made it obvious that Fintech could be moving shifting gears is the fact that close to half of all the funding in FinTech start-ups focused on 83 mega rounds of beyond $100 million in ticket size. These companies were spread across the world though Europe accounted for the lowest proportion of such deals.
Financial services start-ups in southeast Asia raised $993 million across 124 rounds in 2019, proving that it was their best year ever in the business. Looks like India and other countries in the region could be moving into a sweet space over the next 12 to 24 months.
