Amid broader VC slowdown, investment in fintech startups drops

On Aug 4, 2022

A new report from PitchBook Data Inc. released today finds that venture capital investment in financial technology startups has experienced a significant drop amid a broader VC slowdown.

In the second quarter, fintech companies globally raised $24.1 billion in venture capital across 1,103 deals, representing a 17.8% decrease in quarter-over-quarter deal value. The decline is the largest drop in deal value since the third quarter of 2018. Payment companies continued to lead deal value, at $7.6 billion in the quarter, but the figure was 18.7% lower than the previous quarter.

The largest round in the second quarter was expense management platform startup Ramp Business Corp., which raised a $748.3 million Series C round on an $8.1 billion valuation. Other notable deals included point-of-sale software and hardware developer SumUp Inc., with a $626.6 million round on an $8.5 billion valuation, application programming interface-based payment Scalapay S.R.L., which raised $524 million, and GoCardless SAS, which raised $312 million on a $2.1 billion valuation.

Alternative lending had a strong second quarter, with $4.7 billion raised across 176 details. Notable deals included Bloom Financial Technologies (UK) Ltd. raising $306 million, Stashfin raising $270 million on a $750 million valuation and Lev Inc. raising $170 million. Financial services information and regulatory technology companies bucked the downward trend, seeing investment increases of 83.8% and 3.2%, respectively.

Reflecting the overall VC market, the median pre-money valuation for VC-backed, late-stage fintech companies fell 40.6% in the quarter, to $153 million, down from $257.5 million in the previous quarter. The figure is roughly in line with the average valuation for late-stage fintech companies of $151.3 million in 2021.

Early-stage valuations had a median of $51 million, down 19% from $63 million but up 45.7% from the median figure in 2021. Pre-money step-ups, a measurement of valuation acceleration between stages, remained strong, at three times for early-stage fintech companies and 2.3 times for late-stage companies.

There were 68 VC-funded fintech startup exits in the quarter, bringing in $11.2 billion in exit value. Notable exits include a listing for credit technology developer Pagaya Technologies Ltd., the acquisition of Superhero Security Ltd. by Swyftx Pty. Ltd. for $1.1 billion and the acquisition of Fixact by Fiserv Inc. for $650 million.

The report notes that although stability in public markets remains uncertain, it’s predicted that many incumbents and well-established fintech companies will seek to acquire related companies through the rest of the year.