European fintech funding drops 70% in first half of 2023

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Fintech funding in Europe has been greatly affected by the challenging economic environment, the latest report by Finch Capital has found. Specifically, startups in the sector raised a total of €4.6bn in the first half of 2023 — down 70% from €15.3bn in H1 2022.

“Since mid-2022 we have seen an increase in investment discipline in public and private markets, resulting in less funding, lay-offs, less IPOs, flight to quality, and focus on capital efficiency,” said Radboud Vlaar, Managing Partner at Finch Capital.

Amid this increased funding discipline, this year’s first half has seen a 48% decline in the number of deals (434 in total) alongside an 84% decrease in M&A transaction sizes, compared to the equivalent 2022 levels. On the bright side, overall M&A activity fell only by 5% with volumes to match those of the past year.

Meanwhile, although the top 20 funding rounds are back to pre-2020 levels, investment dropped the most for the rest, which accounted for less than 40% of the total deal volume. Startups in the Series A to C stages have felt the heaviest impact. In contrast, seed rounds continued to attract funding.

Slide from the State of European Fintech Report 2023