Octopus Insights – 2017 FinTech Investment Landscape

By Alex Macpherson, Octopus Ventures

FinTech Investment is evolving and trends are emerging that demonstrate in equal measure, how far the UK has come and how far we have still to go. The UK venture capital industry and the wider entrepreneurial ecosystem has dramatically improved over the last decade but the figures show that another turn of the dial is needed to put the UK in a position where it has a depth of local investors with the firepower to support businesses as they scale.

The top five transactions account for over 50% of the total invested into UK FinTech businesses in H1 2017.   With $296m being deployed into these five businesses, the remaining 97 transactions accounted for $268m.  What should we read into this in conjunction with the analysis that 54% of funding came from venture capital investors domiciled outside of the UK?

The significant proportion of the funding into those top five transactions came from overseas.  This should not be a surprise as the UK lacks the number of venture funds able to invest $10m-$20m into growth rounds.  Conversely it would appear UK domiciled funds continue to have a significant impact in the provision of funds to the companies that comprise the 97 other transactions.

This reflects the maturing ecosystem and the funding environment.  The best entrepreneurs will always be able to attract capital whether domestic or international.  The only question for them is which investors can best help their business scale most effectively.   A maturing ecosystem will see international investors look not only at the larger transaction rounds but also explore opportunities in the UK with other entrepreneurs.    Similarly the success of investors into earlier stage investments where the transaction sizes are lower should in time also attract more capital, enabling UK domiciled funds to make bigger investments.

What seems to be clear is due to the UK’s strength in financial services there remains access to exceptional talent in the FinTech space.  There is funding for those entrepreneurs as they start their journey and for the best, international players will join later bigger rounds to back them further.  If only we could back them all the way from UK domiciled funds.