Fintech Q1 2023 report

Fintech Q1 2023 report by Dealroom

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Fintech Q1 2023 report

Fintech startups attracted over $14B in VC funding in Q1 2023. This is far from 2021 levels but more than the last two quarters.
Fintech funding is so far on track to surpass 2020 while falling short of both 2021 and 2022.

It is to be noted that much of this is also due to Stripe’s $6.5B megaround. When removing megarounds, Q1 shows a 36% QoQ decline. The fintech adjustment is not over just yet.

In Q1, fintech has been the most invested industry behind enterprise software (driven by OpenAI and the rest of generative AI), with over $14B in funding. This is, however, a 60% drop from Q1 2022, slightly more than the 51% of the overall market.

Unicorn creation dropped strongly from a peak of over 40 unicorns quarterly in 2021 to just 3 in Q1 2023. Fintech is still the leading industry by unicorns created.

No segment is safe. SaaS is partially a better harbour.

Even when excluding Stripe’s outlier, B2B SaaS attracted 44% of the funding in 2023, in line with a long-term trend of shifting away from B2C and even direct B2B in fintech.
Considering Stripe, B2B SaaS share would exceed 70% so far in 2023.
This does not mean fintech SaaS is not feeling the burden of the current market. Longer sales cycle, net retention challenges, much lower average-contract value, but  still the model is seen as more resilient and capable to adapt to the challenging environment.

When excluding Stripe’s outlier, we still see payments has been the sub-industry attracting the most funding in 2023 so far. Notably Crypto and Defi, which were ahead of payments in 2022, have slid back strongly.

"Although we have observed a general slowdown in fintech activity across Europe, we are still witnessing the emergence of promising businesses, particularly at the early stages. These new startups are focused on building fundamental infrastructure for the future, and benefit from a large pool of talented engineers. As the fintech industry continues to evolve and mature, these companies are well-positioned to drive the next wave of innovation and growth."

Hugo Bongers, Head of ABN AMRO Ventures


What we are keeping an eye on.

Treasury management: the SVB saga reminded startups and VCs of the importance of diversification and risk management of cash reserves. According to a survey from NFX, the number of startups having more than one bank account increased from 43% to 70%. Even without that a challenging VC market and rising inflation where putting pressure on cash and treasury management for startups.
CFO tech: more broadly, the whole CFO tech is seeing a strong spotlight, from invoicing and accounting to tax automation and spend management. A trend we want to spotlight is AI-driven accounting (e.g., Trullion).
Debt collection: rising interest rates driven by ramping inflation and economic slowdown are putting pressure on debt financing and bringing attention back to debt collection processes.
Alternative investments: especially solutions opening up the private market
Value creation has shifted from the public to the private market. Yet, the average investors (retail investors) cannot access investment opportunities in private markets

More on some of these topics will come soon, together with ABN Amro Ventures and other partners.

Exits & public market

The public market is still pretty tough and closed and likely to remain so in 2023 (even if a single high-profile, successful listing can reopen the dances)
The case of Stripe
Stripe missed its IPO window in 2021 when the market was rallying. Seeing today how the market went, with most fintech stocks down over 70%, it might have been a blessing. However, due to tax rules related to employee stocks granted years ago, Stripe was confronted with the choice of either going public in a highly unfavourable market, letting the options expire without compensating its employees or finding another way to cash its employees out.
Stripe took the latter route and raised $6.5B at a $50B valuation, a nearly 50% cut from the last reported valuation of $95B in 2021. This might seem harsh, but it actually notably less than public market peers such as Paypal and Block, which are down 75%+ since their peak in 2021.

Interesting M&A developments
M&A has slightly cooled off from 2021, but it is still showing strong activity. Q1 2023 saw more operations than the quarterly average in 2020.

Not all M&A is equal, so let’s dig a little deeper into a few interesting ones:
1) bankruptcies & fire sales (Railsr)
2) Incumbent acquisition of fintech startups (NatWest x Cushon)
3) startups expanding into new markets or consolidating their lead by acquiring peers (Acorns x GoHenry)
4) PE buyouts taking advantage of the challenging public market (Vista Equity Partners x Duck Creek Technologies
1) The once high-flying UK embedded finance and BaaS provider Railsr has been bought by a consortium of its existing investors, and it’s going into administration to restructure. This sale and bankruptcy come at the end of a difficult period of uncertainty at Railsr, falling from a rumoured valuation of almost $1B to a down round valued at $250M in Oct 2022 to final struggles this year. While embedded finance remains a strongly growing and attractive market, this case shows how a lack of profitability can take down even market leaders in the current environment.
2) Leading UK leading banking and financial services group Natwest has acquired financial well-being and pension startup Cushon for £144M for 85% of the company. This acquisition strengthens NatWest Group's offering with a workplace pensions and savings proposition for its commercial customers and provides a good exit for Cushon investors. The main backer Augmentum Fintech expected the transaction to return £22.8M, more than doubling its original investment.
3) US-based savings and investing unicorn Acorns has acquired London-based GoHenry, a startup providing financial education services and money management to kids and teens from 6 to 18 years. The all-equity deal terms are undisclosed. Acorns was lastly valued at $2B on March 2022, while GoHenry last raised $55M funding on October 2022 at a valuation likely exceeding $250M. Neither of the two companies was profitable in 2022.
The acquisition allows Acorns to expand internationally, thanks to GoHenry's presence in the UK, France, Italy and Spain, as well as start to offer financial wellness for the whole family in the US. For GoHenry, the acquisition gives more steam to keep expanding in Europe and enter the US market through Acorns.
4) Vista Equity Partners, a PE firm focused exclusively on enterprise software, has acquired Duck Creek Technologies, a leading software provider for property and casualty (P&C) insurance. The all-cash transaction valued Duck Creek at $2.6B, a 64% premium over the average of the 30 days before the transaction. Duck Creek went public in 2020 at a $3.5B market cap.
The transaction shows that PE firms recognize some strong and solid fintech businesses are now heavily discounted due to the challenging market and seizing the opportunity.

We expect further consolidation in the fintech market across these routes.

Explore more insights on the fintech market on our new fintech digital research page.



ABN Amro Ventures

Leading fintech corporate venture fund.

ABN AMRO Ventures is the corporate venture fund of ABN AMRO Bank, a leading bank in the Netherlands. The €150m balance sheet fund invests in the most relevant up-and-coming technology companies to boost and accelerate innovation for the bank and its clients.

The collaboration between the fund and the portfolio companies goes far beyond capital: ABN AMRO Ventures actively provides knowledge and expertise, access to the bank and its systems, support from relevant specialists inside and outside ABN AMRO, as well as an extensive external network.