Innovate Finance held an event this week to launch their ‘Capital Investment in UK FinTech in 2023: Insights and Trends’ report, ahead of their Global Summit in London in April.
The panel was moderated by Janine Hirt, CEO of Innovate Finance, who was joined by Simi Shah, project director of innovation and growth at City of London Corporation; Shachar Bialick, founder and CEO of Curve; Tim Levene, partner and CEO of Augmentum FinTech; and Andrew Murray, head of institutional strategic investments at Citi.
Looking back on 2023 there was a consensus that it had been a tough year for fintech, but also the broader ecosystem. However, all parties argued that this was in part because 2021 and 2022 were anomalies in the market.
Levene said: “We were operating in a zero interest rate environment. We had a large number of tourist investors coming into the market, not necessarily helping by putting too much money in the wrong companies at the wrong valuations. Sometimes, the right companies with too much money at the wrong valuations. It created a really distorted dynamic and I think we're reverting back to the historic mean.”
Bialick described 2023 as a “bloodbath” for fintech startups. He added: “The only companies that were able to get money were companies that were able to execute remarkably well during 2022 and turn around the business economics or cost structure.”
Looking to 2024, there were some positive comments, but others looked to the realities of the economic situation.
Bialick commented: “I actually don’t think we’ve hit rock bottom. I think there’s several companies that are floating somehow and eventually they will collapse into reality. That will bring with it the unfortunate outcome of layoffs and companies disappearing.”
However, Bialick also stated that this will likely lead to a strong M&A market, which was predicted for 2023 but didn’t come to fruition.
Levene also made this point, arguing that we are likely to see “strategic” M&As from those corporates which have recognised “that the digital transformation journey has been extraordinarily painful, expensive and not necessarily effective.”
Shah said that in her position promoting the UK market to the world, she has seen increasing interest from US and other international investors. She said for the UK, “It’s recognising that this is a place of innovation, of ideas, and it’s attracting a lot of investment.”
Murray emphasised the resilience of the sector, saying that recovery will be differentiated by sector and stage. For early stage startups, he said things become more normalised this year and there is a “little bit more risk appetite”. For later stage fintechs, he emphasises the need for more IPO activity.