By Daniel Stack, Head of Strategic Initiatives at Innovate Finance 

Investment flows into the UK’s FinTech sector continued to perform strongly in 2019, reaching a record level for a half-year of $2.9 billion across 123 deals, and on track to exceed the 2018 total.

'UK FinTech investment made in the first half of this year nearly 85% of total capital invested in 2018' – Read our UK FinTech investment update for H1 2019: https://t.co/c75qvtP3Rr #FinTech #Investment pic.twitter.com/cIzZXPrzRN

— Innovate Finance (@InnFin) July 16, 2019

Buoyed by a strong start in the first two months of the year, total capital* invested in FinTech startups between January-June 2019 is nearly 85% of last year’s total.

H1 2019 is off to the quickest start to any calendar year of investment in FinTech startups, overshadowing prior years by a significant margin, up just over 45% year-on-year and nearly double the inflows in the second half of 2018.

While the overall number of deals has been steadily decreasing since the start of 2018 — dropping by around 30% year-on-year to 123 deals — investment size has increased, a sign of the growing maturity of the UK FinTech sector.

By far the lion’s share of capital went to later stage venture capital and private equity growth rounds – representing over 85% of total investment. Greensill Capital’s $880m and OakNorth’s $440 million fundraise – the two largest deals this year and both led by SoftBank’s Vision Fund – set a record as the largest UK FinTech startup fundraises.

With the downward trend in deal volume and the rising clip size per investment, angel, seed and early stage venture capital rounds decreased, accounting for less than 15% of capital invested.

Challenger banks dominated the investment charts with OakNorth ($440m), Monzo ($147m) and Starling Bank ($98m) kicking off with significant fundraises, with these 3 big deals. In addition, the payments and FX sectors also saw significant investments, with Checkout.com ($230m), WorldRemit ($175m) and GoCardless ($76m) also raising further rounds to support their growth. Lastly, it’s worthwhile to note, small business lender iwoca announced in February a fundraise of $195 million, however it missed our top-ten rankings as only $26 million was a reported equity investment, alongside $169 million debt financing. Similarly, e-commerce credit retail finance provider DivideBuy raised $78m (a combination of $15m equity and $63m debt.

While London-based FinTech companies once again dominated investment inflows (90% of the total), there were some significant raises by firms based in other parts of the country, notably in northern UK (Greater Manchester, Derbyshire and Newcastle). In terms of the number of deals, London FinTechs accounted for 78%, while other parts of the UK made up 22%.

Some of the larger equity deals outside of London included Evolution Funding in Chesterfield ($143m), DivideBuy in Newcastle ($15m), AccessPay in Manchester ($12m), Anna Money in Cardiff ($11m) and Mojo Mortgages in Macclesfield ($9m).

*Data provided by PitchBook as of 28 June 2019. Data includes investment by angel, seed, venture capital, corporate and private equity growth/expansion investment in UK FinTech (excluding any reported debt raised).

Source: Innovate Finance