Not so long ago, fintech startups remained among the most attractive assets in the investment market, with their regularly growing ratings. As the coronavirus pandemic continues, the amount of investment in the fintech startups as well as the number of deals involving them has been dropping globally, for several months. According to the CB Insights analytics company, on the immediate horizon the market will face even harder times and critical uncertainty at the very least.
As of the end of March 2020, the total number of deals and the amount of investment was falling progressively compared to both the previous month and year-on-year.
In the past three years, during the period between March and December, the number of rounds for fintech startups in the market has been within the range of 200 to 300 deals. In 2019–2020, this indicator varied between 100 and 200 deals (for example, last March saw 142 deals, January 218, November 232, etc.).
CB Insights experts clarify that the number of deals has been falling across all regions, including Asia, Europe and the United States where they hit the record quarterly low of the recent years.
“COVID-19 has had a global impact on the fintech industry,” CB Insights noted.
Similar trends have been recorded with regard to the value of the deals. Analysts estimate that the total investment in the fintech startups over Q1 2020 is around $6 bln, which is the lowest figure since 2017.
“Currently, investors are getting rid of their assets in order to strengthen their funds. Fintech companies should follow their example because attracting funding in today’s market may prove to be extremely difficult and expensive.”
Analysts recommend that companies tighten their belts and focus on increasing profitability rather than growth at all costs. They believe that this will be a turnaround for the industry compared to the previous decade when it was possible to raise huge investment without showing profit margins. It may be particularly hard to do for companies in the phase of aggressive growth.
“It will create investment-related difficulties for startups in their early stages. They will have to compete with larger and more capitalized players for a smaller amount of venture funding,” CB Insights concluded.