Fintech companies in North America and Europe gain 17% more in investments

Late-stage investment round funding for Stripe has taken its valuation to $13.5bn. Photo: Dado Ruvic/Reuters

North American and European fintech companies saw a 17% year-on-year growth in the third quarter of 2020, bringing the total to $8.9bn (£6.53bn) raised in venture capital, compared to the second quarter figure of $7.6bn.

Despite the solid gains, only 414 deals closed during the third quarter, according to research analysed and published by Comprar Acciones. This is the lowest number of deals on record since the third quarter of 2017.

“It implies that more capital went into fewer funding rounds in the three-month period,” said Comprar.

Fintech companies have seen an explosion in growth as more consumers shop, trade and bank online amid the COVID-19 lockdown measures.

Among the deals generating the highest gains were financing rounds for fintech companies. Some of the leaders including trading site operator Robinhood, payment processing platform Stripe, and Chime, an online bank.

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Stripe had the highest valuation gain in 2020, according to Pitchbook data, with a Series G round that raised $850m, taking its valuation up from $22.5bn to $36bn — a 60% increase.

US fintech companies have seen eyewatering valuations in 2020 following the steep rise in venture capital being raised. Chart: Pitchbook

“The increases seen in their valuations had to do with the fact that they are big entities and relatively mature,” said Comprar.

While American VC companies have witnessed sky high appraisals of late, funding in Europe’s tech industry as a whole has gained as well as the sector benefits from the “pandemic-induced shift to digital,” according to the Atomico State of European Tech report.

Private funding is on track to hit a new record of $41bn and 18 companies have achieved unicorn status — a startup with a value of over $1bninso far in 2020, Atomico said. These projections could head even higher with total investment reaching $41bn, once the total has been adjusted to account for the reporting lag.

The companies which raised megarounds in funding include Sweden’s Klarna ($650m) and Northvolt ($600m); the UK’s Revolut ($580m), Karma Kitchen ($317m) and Cazoo ($310m); Germany’s Auto1 Group ($300m), Lilium ($275m) and Tier ($250m); France’s Mirakl ($300m) and Romania’s UiPath ($225m).

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