Established European fintech firms are experiencing some relief this year following a challenging 2023.
Last year, venture-growth companies faced difficulties due to several factors, including the withdrawal of tourist investors, increased volatility, lower returns, and weak public market valuations. However, 2024 is showing signs of improvements, with deal values and valuations increasing significantly Q1 2024, data newly released by PitchBook show.
The figures, shared in the “Q1 2024 European VC Valuations Report”, reveal a positive note in European venture-growth valuations this year, with median venture capital (VC) deal values in the stage increasing significantly to EUR 9.3 million in Q1 2024, compared with EUR 6.0 million last year. Valuations also displayed signs of uptick, increasing 4.5% to EUR 21.7 million.
Venture-growth VC pre-money valuation (EUR million) and deal value (EUR million), Source: Q1 2024 European VC Valuations Report, PitchBook, May 2024
According to PitchBook, this rise was likely helped by the rally public equity valuations have seen since January 2024, providing more favorable comparables. Notably, prominent venture-growth fintech companies such as Klarna and Monzo have achieved higher implied valuations recently.
Klarna, the Swedish fintech company once crowned as Europe’s most valuable startup, is reportedly in discussions with banks for a potential US initial public offering (IPO) as early as Q3 2024, with an expected valuation of US$20 billion. The company, known for its buy now, pay later (BNPL) services, was last valued at US$6.7 billion after US$800 million fundraise in 2022. It had reached a staggering US$45.6 billion valuation in a 2021 round.
Monzo, a digital bank from the UK serving nine million customers, raised a US$430 million round in March 2024, giving it a post-money valuation of US$5 billion. The company, which said it became profitable in March 2023, said it would use the funds to expand and introduce new products. Monzo was valued at US$4.5 billion in late 2021 after a previous funding round.
Deal sizes and valuations for fintech VC investments also grew in both early-stage and late-stage deals. The median early-stage VC deal value in fintech sat at EUR 3.3 million in Q1 2024, up 50% from EUR 2.2 million in 2023. Median late-stage VC deal value rose 2.4% during the same period, reaching EUR 4.2 million in Q1 2024.
In Q1 2024, fintech led early-stage VC deals across all major verticals, securing the largest median round of the quarter, followed by cleantech (EUR 2.8 million) and software-as-a-service (SaaS) (EUR 2.6 million).
Median early-stage VC deal value (EUR million) by vertical, Source: Q1 2024 European VC Valuations Report, PitchBook, May 2024
Europe sees growth in 2024
The recovery in European fintech VC is further supported by data released in April by market intelligence platform CB Insights. The data, released as part of the “State of Fintech Q1 2024” report, reveal that Europe was the only major global region to see fintech funding increase in Q1 2024, growing by 22% quarter-on-quarter (QoQ) to US$2.2 billion.
Key deals were secured in the UK and the Netherlands, exemplified by Monzo’s US$430 million Series I, Flagstone’s US$139 million round (UK), Mews’ US$110 million Series D (Netherlands), and DataSnipper’s US$100 million Series B (Netherlands).
Experts anticipate continued growth in the European fintech sector moving forward, especially in areas such as alternative payments, blockchain technology and regtech.
James Booth, VP Partner Management EMEA at PPRO, anticipates an increase in the use of payment methods such as bank transfers, e-wallets, and buy now, pay later, telling Sifted in January 2024 that British consumers are already using alternative payment methods in more than 50% of online transactions.
James Devlin from Fidelity International Strategic Ventures predicts that regtech will gain traction in 2024 as regulators continue to pressure financial institutions to meet compliance obligations, particularly in monitoring staff communications.
Finally, Carol Hagh, a Non-Executive Director and Chair of the Screening Committee at Harvard Business School Alumni Angels of the UK, claims that while a mass resurgence of cryptocurrency is unlikely, blockchain technology holds promise. She anticipates that 2024 might witness substantial adoption and commercialization of the technology, particularly in sectors such as insurance, healthcare, and supply chain management.
Despite the positive outlook for Europe, global fintech investments faced challenges in Q1 2024, with a 16% decrease in funding compared to the previous quarter and a 119% year-over-year (YoY) decline. This decline reflects broader economic uncertainties, soaring inflation and a looming global recession. Global fintech funding dropped by 50% to US$39.2 billion in 2023, falling from US$78.6 billion in 2022 – a far cry from the record of US$140.8 billion secured in 2021.
Featured image credit: edited from freepik
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