The initial half of 2024 has witnessed a substantial drop in investment within Ireland’s fintech sector, signaling a shift towards more cautious attitudes among investors.
According to the annual State of European Fintech report released by Finch Capital, total investment plummeted by 90% compared to the previous year, falling from €212 million to merely €22 million. Although venture and buyout capital levels in Ireland remained relatively stable, the average fund sizes experienced a significant decline of 40%.
The largest transaction in the first six months was a €10 million funding round for Zartis, a software consulting firm based in Cork. Notably, the report does not account for the acquisition of Dublin’s SoftCo by private equity firm Keensight Capital, a deal estimated to exceed €100 million.
This report emerges after a year during which the Irish lobbying organization Financial Services Ireland urged for increased governmental support for the fintech landscape, advocating for the creation of a national fintech center.
Finch Capital links the downturn in Irish fundraising to larger market conditions across Europe, which have been impacted by economic challenges and risk-averse investors. Total investment in European fintech ventures decreased by 25%, from €3.8 billion to €2.9 billion.
If confidence returns to the market, Finch Capital predicts that funding levels and deal activities could see a rebound. Mike Brennan, a partner at Finch Capital, noted, “The hurdles faced by fintech in 2023 were essential for the sector to grow and evolve into a more sustainable industry.”
While the overall funding landscape has contracted and the pursuit of unicorns has slowed, there remain ample opportunities for companies that prioritize capital efficiency and have identifiable pathways to profitability. Brennan added, “As AI continues to reshape the sector and with substantial capital still available, the upcoming 12 to 18 months could signify a pivotal shift for fintech in Europe. Future success stories in fintech will likely prioritize strong financial health over mere rapid revenue expansion.”
For those interested, you can explore the new challenges and opportunities that artificial intelligence brings to the banking sector at Finextra’s inaugural NextGenAI conference on November 26, 2024. Register your interest here.