Finance · 19 August 2016

The growth opportunities out there for fintech startups

fintech
Investment in UK fintech rose by 35 per cent in 2015

The UK is now the fastest growing region for fintech investment globally, according to recent research from Accenture. In his latest article for Business Advice, Crowdcube CEO Darren Westlake discusses some of the growth opportunities out there for fintech startups.

The UK fintech sector generated £6.6bn in 2015 and has a workforce of over 60,000 – more people apparently work in UK fintech than in Singapore, Hong Kong and Australia combined. This is great news for entrepreneurs and startups looking to launch and grow in the flourishing sector.

The government is recognising the important role fintech is playing in increasing competition in financial services, boosting innovation and making the UK the global capital of fintech.

Another significant moment for the sector was when Eileen Burbridge, founding partner of Passion Capital and investor in Crowdcube businesses, including Mondo, was appointed Special Envoy for fintech this year to promote the UK fintech sector home and overseas. She is also supporting regulators in helping to create a regulatory system that is transparent and supports the sector.

Fintech is yet another example of great British startups and innovators not just leading the way, but also disrupting the natural order of things in financial services. The established banks simply haven’t kept pace with emerging digital technologies, and it is the fintech firms and alternative finance providers that have filled the void.

In June, Bank of England governor Mark Carney, said: “Fintech will change the nature of money, shake the foundations of central banking and deliver nothing less than a democratic revolution for all who use financial services.” He added: “With time, fintech could mean a more open, more transparent, and more democratic global financial system.”

Crowdcube set out to do the same five years ago. We saw that investing in seed stage, startup and growth businesses was complex, elitist and largely confined to institutional investors.

The platform wanted to shake things up by democratising equity investment, enabling everyone from armchair investors to high net-worth individuals to invest – and we love that we have since been recognised for our disruptive ways.

Crowdcube is proud of this and also proud of the fact that appetite for both entrepreneurs and investors in digital finance is currently booming. More encouraging is that we’re seeing a growing number of fintech businesses turning to alternative investment to raise finance, while others look to co-fund investment rounds through crowdfunding alongside the backing of venture capital.

According to figures by Innovate Finance, investment into UK fintech businesses rose by 35 per cent to reach $901m in 2015 – and over 60 per cent of last year’s fintech venture capital rounds involved alternative finance.

Mondo, which funded on Crowdcube at record-breaking speeds in March 2016 – raising £1m in just 96 seconds – describes itself as a “mobile-first challenger bank” designed to disrupt the banking process.

Backed by Passion Capital, Mondo is just one of those exciting startups that is using smart technology and smart ways of thinking with its customer-first attitude, aimed squarely at a younger generation that rely on smartphones and are mistrustful of traditional banks.

GoHenry is another one of those very cool, very exciting new businesses that is making people sit up and take notice. A digital banking solution that aims to make kids smarter at managing money than their parents, the company raised nearly £4m, making it one of the largest crowdfunded deals on the platform to date.

One of the latest fintech companies on our platform was Revolut, a multi-currency solution enabling customers to manage and move money in different currencies.

Already backed by Balderton Capital and Index Ventures, the company raised £1m on Crowdcube to fund international expansion and development of its product.

Crowdcube’s own record-breaking raise saw over 3,700 members of the crowd invest over £7m alongside existing venture capital backers Balderton Capital. All of which points to a strong investor appetite to invest and back this flourishing sector.

The future is certainly bright in UK fintech and we’re lucky enough to see it at first hand, while the size of funding rounds and speed at which these businesses are raising investment is head spinning.

As the rush for fintech gold continues, we expect to see ever more exciting, innovative and disruptive startups join what is fast becoming the new world of finance.

Missed Darren’s previous blog post on how to manage accelerated growth as a startup? Catch up here

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ABOUT THE EXPERT

Darren Westlake is the co-founder and CEO of Crowdcube, an online platform that enables startup, early and growth-stage businesses, from a range of sectors, to raise finance with the added benefit of being backed by the crowd.

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