Fintech Hammered with Funding Returning to 2017 Levels
Boom times are gone, but there is always hope!
CB Insights Q1 report on fintech is an eye-opener, with the funding reaching lows not seen since 2017.
What can you say when investors have moved on to the next shiny thing, AI which received an 8-fold increase in funding in 2023!
Still, if you ask ChatGPT, it denies it:
“No, the reduction in fintech funding is not primarily due to investors putting money in artificial intelligence. It’s more related to a market correction, long-term trend levels, and macroeconomic conditions.”
I disagree with ChatGPT and think a fair amount of “hot money” that would have gone to fintech didn’t. However, I agree that a market correction was healthy and necessary.
👉TAKEAWAYS
🔹 Fintech funding falls 16% QoQ to its lowest quarterly level since 2017.
Quarterly funding declined to $7.3B in Q1’24, counter to the 11% rebound in the broader venture market.
🔹 Average deal size YTD in fintech is $11.1M, down 18% vs. $13.6M in full-year 2023.
A dearth of blockbuster deals is driving the decline: In Q1’24, there were just 12 mega-rounds (deals worth $100M or more) representing 26% of total funding — the lowest share since Q2’23, when it hit 23%.
🔹 Mid- and late-stage deals make up 20% of deals YTD, up from 18% in full-year 2023, as investors look to startups with more established track records.
So far this year, investors are favoring later-stage companies to a greater degree than the past 2 years.
🔹 Banking startups have a billion-dollar quarter.
Banking funding doubled in Q1’24 to reach $1B across 38 deals. Five of the top 10 banking deals in the quarter were late-stage, and 2 were mega-rounds of $100M+.
🔹 Europe fintech funding increases 22% QoQ to $2.2B.
Europe was the only major global region to see fintech funding increase in Q1’24.
👊HOW TO FEEL ABOUT THIS?👊
Remain calm! Fintech isn’t dead and has a lot more work to do.
That said, it’s time to reign in expectations.
I think it's key to remember that the Fintech industry is in a macro version of Gartner’s “hype cycle.”
The industry is still reeling as it slides down the curve from the “peak of inflated expectations” to the “trough of disillusionment.”
I don’t think it’s bottomed out yet, and I predict a few more dire quarters before things will rebound and rise up the “slope of enlightenment.”
That said, it is unreasonable to assume that an upward rise toward enlightenment will ever spawn a bubble market like we saw in 21 and 22.
Those days are not coming back.
Thoughts?
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