Female fintech founders outperform UK average, but sector’s losses reach £1.5bn
KPMG finds sector needs £825m in additional capital to stem startup collapses over the next 18 months.
Female-led fintechs entered the Covid-19 crisis with the longest funding runway of the sector, with 78 per cent of them having 18 months or more of cash.
Meanwhile nearly half of all fintechs found themselves at the start of Covid-19 with less than 18 months of funding remaining, according to KPMG’sFintech Focus study released today.
“It’s also really encouraging to see that the picture is still positive for female founders,” said Anton Ruddenklau, KPMG Fintech’s global co-head.
“Last year we found that UK fintechs with a female founder or co-founder typically achieved 113% higher returns on paper for investors. This year, female founders make up 4 of the top 20 fintechs with the highest IRRs as of their latest funding round.”
KPMG also found that the £49bn sector is facing increasing losses with 84 per cent of fintechs reporting increasing losses of the past year.
In total the sector is on track to lose £1.5bn over the last 12 months, with Covid-19 adding to already steep losses.
For every startup in the scope of Fintech Focus to survive the next 18 months, a further £825m would be needed to be raised to see every fintech escape the pandemic.
“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,” said Ruddenklau.
“Nonetheless, patient capital must be found, and now more than ever institutional investors need investment data to support their participation.”
Finding that funding is unlikely, and KPMG notes that among its sample valuations are expected to fall in further down-rounds over the next year.
Two companies in its sample had taken trade sales in the last year, and the chance of a profitable exit “could be even more limited” until we reach a post-Covid environment, the report warns.