FinTech in Europe has been hit hard by the downturn and has seen a significant slowdown in both venture deal count and value.
According to PitchBook data, only €136 million has been invested across 19 European FinTech deals so far this year.
Investors are expecting FinTech dealmaking to fall short of previous records and valuations to suffer.
“As we head into 2023, the situation for cash-starved FinTech companies is likely to become even more challenging,” said Stefan Tirtey, managing partner at FinTech investor CommerzVentures. “Many of the inside investors having footed internal rounds will have maxed out their reserves, leaving companies to find new investors externally who are likely to be more selective. We expect to see a growing number of down rounds, distressed sales and exits.”
Despite the current challenges, there is still plenty of capital in the market waiting to be put to work. To get a better understanding of what investors are looking for in FinTech startups, five active VCs within the FinTech space were reached and asked to share their thoughts on two startups—one in their portfolio and another that they have their eye on.
Startup: Elwood & Carbon Future
Stefan Tirtey, Managing partner at CommerzVentures, highlighted Elwood and Carbon Future as promising FinTech startups. He said, “Elwood provides a full-stack platform enabling all types of financial institutions to access, trade and manage digital asset exposure. The UK-based company has seen phenomenal growth during 2022 in spite of the headwinds for FinTech in general and crypto in particular.”
He also noted, “Germany-based Carbon Future is a promising company at the intersection of FinTech and climate tech. Through their platform, businesses can build credible, long-term and diverse carbon removal portfolios, helping them to neutralize carbon emissions and reach their net-zero commitments.”
Startup: FintechOS & Codat
Vinoth Jayakumar, Partner at Molten Ventures, shared his thoughts on FintechOS and Codat.
He said, “FintechOS is a London-headquartered FinTech infrastructure software company that radically simplifies the development and launch of financial products for banks and insurers around the world.” He added, “London-based Codat offers fintechs and financial institutions a universal API to build connected products for their business customers.”
Startup: Kita Earth & Supercede
D’Arcy Whelan, Associate at Outward VC, highlighted Kita Earth and Supercede as promising FinTech startups. He said, “Kita offers carbon insurance for companies, reducing the risk that is inherent in the carbon offsetting market.
The London-based company’s product protects buyers from forward purchased carbon removal credits against under-delivery, encouraging a greater flow of finance into these projects, and essentially into offsetting.” He also noted, “Also based in the UK, Supercede provides reinsurance software for clients, brokers and underwriters, helping them to collaborate and transact in real-time.”
The Bottom Line
Despite the challenging macro environment, there are still plenty of promising FinTech startups in Europe that investors are paying attention to.
These startups include Elwood, Carbon Future, FintechOS, Codat, Kita Earth, and Supercede.
Investors are on the lookout for startups that can buck the current trend and provide innovative solutions in the fintech space.