The State of Fintech in 2024
As we progressed through Q1 of 2024, the fintech sector is at a pivotal crossroads. Despite an 11% rebound in the broader venture market, fintech funding has decreased by 16% quarter-on-quarter, plummeting to its lowest quarterly level since 2017 with a total of $7.3 billion. This presents a mixed landscape of challenges and opportunities within the sector.
Key Trends and Observations
- Reduced Deal Sizes: The average deal size in fintech year-to-date stands at $11.1 million, down 18% from $13.6 million in 2023. This reduction is primarily due to a scarcity of blockbuster deals. In Q1, there were only 12 mega-rounds (deals worth $100 million or more), accounting for 26% of total funding—the lowest share since Q2 of 2023.
- Focus on Established Players: There’s a noticeable shift towards mid- and late-stage deals, which now represent 20% of the year-to-date transactions, up from 18% in 2023. This trend is particularly pronounced in sectors like payments and digital lending, indicating a preference for startups with proven track records.
- Banking Sector Surge: The banking segment of fintech experienced significant growth, with funding doubling to $1 billion across 38 deals in Q1. Notable transactions included the Series I funding of UK-based challenger bank Monzo, which raised $431 million, and Germany-based Solaris with a $104 million Series F round.
- Regional Variations: Europe emerged as a standout, with fintech funding up by 22% quarter-on-quarter to $2.2 billion, leading in exits with 37% of the total. In contrast, the US experienced an 11% decline in funding to $3.3 billion but still maintained the highest total in fundraising among all regions.
- Decrease in Mega-Rounds: The frequency and percentage of mega-rounds have decreased, signaling a pullback from high-stake investments amid economic uncertainty.
- Strategic Investments: There is an increasing trend towards strategic investments where larger financial institutions and tech companies invest in fintech startups not just for financial returns but also to forge strategic partnerships that integrate innovative technologies into their existing platforms.
- AI in Fintech: Fintech firms leveraging AI have been particularly attractive to investors. These applications promise significant cost savings and improved accuracy, making them compelling investment opportunities. For example, Ask-AI raised $11 million for its generative AI assistant for enterprise workflows.
Top Equity Deals in Q1’24
Monzo raised the largest round of $431 million in a Series I, accounting for 5.9% of the total funding. Other significant rounds included Flexport with a $260 million convertible note and Bilt Rewards, which secured $200 million in a Series C funding. The list also features Kore.ai, Flagstone, and Mews, all contributing to the dynamic landscape of fintech financing.
New Unicorns
Several new unicorns have emerged in the financial services sector, showcasing significant growth and innovation. Companies such as Monad Labs, Uzum, Perfios, and HashKey have all achieved billion-dollar valuations, securing their positions in the elite group of fintech unicorns in 2024.
- Monad Labs
- Valuation: $3B
- Date Joined: April 9, 2024
- Country: United States
- City: New York
- Industry: Financial Services
- Select Investors: HTX Ventures, Electric Capital, Coinbase Ventures
- Uzum
- Valuation: $1.16B
- Date Joined: March 26, 2024
- Country: Uzbekistan
- City: Tashkent
- Industry: Financial Services
- Select Investors: FinSight Ventures
- Perfios
- Valuation: $1B
- Date Joined: March 13, 2024
- Country: India
- City: Mumbai
- Industry: Financial Services
- Select Investors: Bessemer Venture Partners, Teachers’ Venture Growth
- HashKey
- Valuation: $1.30B
- Date Joined: January 16, 2024
- Country: Hong Kong
- City: N/A
- Industry: Financial Services
- Select Investors: OKX Ventures
The full list of unicorn companies can be seen here https://www.cbinsights.com/research-unicorn-companies
As 2024 progresses, it will be critical to monitor how these trends evolve, especially concerning the integration of new technologies and the geographical distribution of investments. Fintech remains a sector poised for transformation and growth, reflective of broader shifts in the global economic landscape.
Data Source: CBInsights