Funding for Irish fintech companies has sharply declined in the first half of 2024, with only €22 million invested, according to the State of European Fintech report by Finch Capital. This figure starkly contrasts with the €212 million recorded during the same period in 2023. The report highlights a broader trend of cautious investor sentiment affecting the global fintech sector.
The decline in funding is largely attributed to economic challenges and a shift in investor priorities. Notably, a significant outlier deal occurred in March when Dublin-based SoftCo was acquired by Keensight Capital for over €100 million, which skews the overall investment figures. The largest funding round this year was a €10 million investment in Cork-based Zartis.
Despite the downturn, Finch Capital partner Mike Brennan suggests that these challenges are essential for the sector's maturation and sustainability. He emphasizes that while the chase for unicorns has slowed, opportunities remain for companies that demonstrate capital efficiency and a clear path to profitability.
In Europe, the UK has solidified its dominance in the fintech space, accounting for two-thirds of all deals in the first half of 2024. Overall, European fintech investment fell by 25% to €2.9 billion during this period. The report indicates that funding rounds for fintech unicorns have also slowed, with investors now favoring companies with strong financial fundamentals over those with inflated valuations based on rapid growth.
There are signs of recovery in the fintech job market, which has grown by 10% year-on-year, suggesting resilience in the sector that could lead to a rebound in investment activity. Brennan predicts that the next 12 to 18 months will be pivotal for fintech in Europe, with future success stories likely emerging from companies with sound financials rather than just rapid revenue growth.
He notes a shift in valuation benchmarks, with €600 million becoming the new standard for emerging fintechs, moving away from the traditional unicorn model. This evolution reflects a broader trend towards sustainable growth in the fintech industry.
