Fintech startups in the UK are expected to raise £825 million to achieve 18 months of funding runway for the firms to survive the negative effects of the pandemic. Currently, the country’s fintech industry is valued at $48.5 billion, according to a report published by KPMG.
The report titled Fintech Focus said that the sector is still providing attractive returns to investors on paper, especially for early stage investors. Anton Ruddenklau, Global Co-Head, KPMG Fintech said: “Covid-19 is sharpening the minds of the entire FinTech ecosystem when thinking about what makes a thriving and sustainable sector. For the FinTech firms that are truly transformative with their business models, the path to profitability at scale is still likely to be 10 years plus, and for these firms to remain competitive they will need to be systemically important. Nonetheless, patient capital must be found, and now more than ever institutional investors need investment data to support their participation.”
It appears that the median internal rate of return for first round investors based on the latest round is 71 percent, the report said. Raising funds remains a challenge for fintechs during the pandemic. The KPMG study was based on a sample of 100 fintech companies in the UK across many verticals.