Fintech

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Introduction

Fintech is one of the largest VC investment categories, together with health, enterprise software, energy and transportation.

Over $480B in VC funding has gone into fintech startups since 2016, and more than $1.1T of exit value has been created in the same period.
Fintech startups are now worth $3.7T, with 2/3 of the value still private.

Fintech has, however, been hit hard by the venture capital market downturn. Fintech startups raised $6B globally in Q3 2023, the lowest level since 2017 and less than half the same period last year.
Zooming out tough, fintech VC investment in 2023 are still 6x compared to one decade ago.

Fintech sub-industries

Fintech is defined as the intersection between finance and technology. In our definition of fintech, we also include insurtech, crypto & defi and fintech-oriented regtech.
We do not include companies that serve finance as one of several industries.

Looking back to 2016, mortgages & lending was the largest segment together with payments, while crypto & defi was just nascent.

Fast forward to 2021-2022, crypto & defi became the largest segment (along with payments) before falling back strongly in 2023, while mortgages & lending share has shrunk significantly.
Payments has overall been the dominant fintech sub-industry in the last few years.

Zooming into specific trends, change the yearly view and select the sub-industry of interest to see the evolution of fintech segments in time.

Comparison with other industries

The share of total VC funding going to Fintech has more than doubled within the last ten years, from just above 8% to a peak of 19% in 2021. In 2023 so far, the share has dropped to 13%.

Looking at Q3 2023, Fintech has dropped to 5th most funded industry, behind health, transportation, energy and enterprise software, with $6B in funding. By years end, Fintech is expected to drop over 50% compared to last year.

Fintech had been the top investment sector ahead of health in 2022 and one of the fastest growing in the last 24 months. However, fintech funding dropped more than the average for the VC market in the last 12 months.

Quarterly investments

Fintech startups attracted over $6B in VC funding in Q3 2023. This is almost seven times less than peak funding in 2021 and the lowest level in the last seven years. Fintech funding in 2023 surpassed 2020 levels until August but has since then fallen behind.

Enterprise value

Fintech startups are now worth $3.7T, matching 2021 peak levels, with nearly 2/3 of the value still private. Public fintech valuations have dropped significantly from 2021 to 2022, erasing almost ~$0.7T of market cap but has rebounded slightly since, while the combined private valuation is still growing albeit slowly.

Unicorns

Unicorn creation dropped strongly from a peak of over 40 unicorns quarterly in 2021, however has rebounded compared to previous quarters with 5 new unicorns minted in Q3 2023. Fintech is still the leading industry by cumulative unicorns created.

Exits

Public listings (IPOs and SPACs) are at their minimum in the latest years, while M&A is very active and above 2020 levels.

Public listings (IPOs and SPACs) dropped significantly after the outlier year of 2021, both in combined value and count.
M&A is the most common exit route by count and reached its highest activity ever in 2022.

Investment by stage

Q3 2023 is showing a slowdown at the early stage. However, figures will likely rise slightly due to some reporting lag on smaller rounds.

Early stage
Zooming out, early-stage fintech funding more than doubled from 2016 to 2021-2022 however, 2023 is expected to fall slightly short of pre-pandemic levels.

Breakout stage

A more substantial drop in funding is present than in the early stage, with Q3 2023 closing at levels seen in 2018 and showing a nearly 3x decline from the same period last year.
Breakout-stage fintech funding grew almost 4x from 2016 to 2021.

Scaleup stage

Late-stage pulled back the most with Q3 2023 being the least active quarter since before 2018 (the rebound in Q1 2023 is heavily due to Stripe's $6.5B mega-round).
Late-stage fintech funding spiked in 2021 with over $80B in funding, a four-time increase from 2020.

Looking at it all together, the share of mega-rounds has increased from just 20% in 2012 to over 50-60% in 2021-2023, peaking in 2021.

Investors

Most active investors into Fintech

We’ve ranked the top VC investors based on the number of investments they’ve made into fintech startups (the number one investor is indexed to 100).

Fintech segments and tags

Looking at business models in fintech. B2B SaaS startups attracted the most funding in 2023. Overall, B2C share in fintech has constantly been shrinking since 2016 from over 50% to around 20% in 2022-2023.

Payment startups have attracted the largest share of funding in 2023 (updated until Q3 2023), even if a large part of this came from Stripe mega-financing.

Zooming into specific trends, change the yearly view and select the sub-industry of interest to see the evolution of fintech segments in time.

Top countries and cities

The US has been the leading VC market for fintech, notably followed by the UK, which pushes above its weight, and India. All countries have been experiencing a declining growth in the past years.

While London surpassed the Bay Area to gain the top spot in 2022, the Bay Area comes back on top this year. NYC comes a close third.
Los Angeles has been a fast growing hub in the past years.

Top fintech startups

Top 100 fintech startups to watch ranked by Dealroom signal.

The Dealroom Signal is a proprietary predictive algorithm to discover the most promising companies. The input for each Signal's algorithm includes company growth (team size, product growth), founders' strength, completion score and contextual data (does the company fit into segments of interest), timing (is the startup likely to raise their next round soon) and team composition.

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