The UK’s fintech sector raised more money in the first half of the year than in any equivalent period on record – a remarkable £1.7bn according to data just release by the growth company market analyst Beauhurst. The sector raised so much money that 2019 is already a record year for investment in UK fintechs.
Beneath the headline figures, however, something interesting is going on. Strip out the £1.2bn of funding or so raised by nine “megarounds” of funding – investments worth more than £50m – and the first-half total was reduced to £514m. By historical standards, that looks pretty healthy, but it was actually slightly down on last year’s first-half total.
Over time, it’s natural that we will see more of these megarounds. We are still in the first generation of fintech foundation and funding – as more of this class mature, they will naturally pick up larger sums from investors; meanwhile, subsequent generations will join them.
Moreover, while the overall fund-raising figures have been skewed by these large deals, that doesn’t need to concern us. As the data shows, smaller fintechs are still picking up plenty of finance – the first half of the year was the second-best period on record, even stripping out the megarounds.
Still, the figures suggest we are now moving to a different stage in the evolution of the UK’s fintech sector. We’re still getting lots of exciting and innovative start-ups, but we’re also now producing businesses that are proving they have what it takes to compete in the big leagues.
For a country sometimes criticised for its failure to translate innovative entrepreneurialism into sustained commercial success, this is important. In truth, that criticism has always been a little unfair. It is the case that the UK cannot match the US for its record of creating giant technology businesses, but it has still produced a growing number of unicorn fintech companies – and it is certainly streets ahead of any other European competitor.
Who are the nine UK fintechs ready to take on the world with their new-found financial firepower? Here’s the list, courtesy of Beauhurst’s research.
Oaknorth – the challenger bank raised $440m from Softbank’s Vision Fund, the latest European technology company fund-raising in history. Oaknorth is a digital bank focused on the small and medium-sized enterprise market but has a growing data analytics business too.
Monzo – rapidly becoming one of the UK’s best-known fintechs, the digital bank Monzo is now valued at close to £2bn after a £113m fund-raising completed in June.
Starling Bank – matching Monzo in its rapid ascendancy, Starling is a digital banking platform; it raised £75m in February.
Checkout.com – this company provides payment processing software to retail merchants and is the first ever British start-up tohave received a $1bn valuation through its first funding round.
Iwoca – another SME specialist, Iwoca has grown out of a business set up to provide lending to traders on platforms such as eBay and is already highly profitable.
WorldRemit – this international payments company is another big name in what has become one of the fastest-growing segments of fintech.
GoCardless – the direct debit facilitator was founded by Monzo founder Tom Blomfield and raised £58m during the first half.
MarketInvoice – one of the earliest challenger brands in SME finance, MarketInvoice enables small businesses to secure funding by borrowing against the value of bills that customers have yet to settle.
Dividebuy – this company operates an add-on finance service for a range of online retailers, allowing their users to access interest-free when they check out and make their purchases.
