Funding for the fintech sector in Ireland has witnessed a staggering 90% decline in the first half of 2024 compared to the same period last year, according to a new report by Finch Capital. The sector raised only €22 million during this period, a sharp drop from €212 million in the first half of 2023.
While venture capital and buyout activity in Ireland remains consistent with last year’s levels, the report highlights a significant 40% decrease in average fund sizes. The largest deal in the sector during the first half of this year was a €10 million funding round for Zartis, a company based in Cork.
Finch Capital attributes this dramatic contraction in fintech funding to broader market trends, including cautious investor sentiment and ongoing economic challenges. However, the report also expresses optimism for a potential recovery next year, citing an expected resurgence in investor confidence and an increase in deal volumes.
Mike Brennan, Partner at Finch Capital, stated, “The challenges that fintech faced in 2023 were necessary for the sector to mature and become more sustainable. While funding may be down overall, and unicorn chasing has slowed, there is plenty of opportunity for companies that are capital-efficient and have a clear path to profit.”
On a broader European scale, total capital invested in fintech companies decreased by 25%, falling from €3.8 billion in the first half of 2023 to €2.9 billion in the same period this year. Nevertheless, the report indicates early signs of recovery in Europe’s fintech job market, which expanded by 10% year-on-year. This growth suggests that resilience in the sector could support a rebound in investment activity.
The UK accounted for two-thirds of the total volume of fintech deals, while the Netherlands also demonstrated stability with consistent deal volumes. Both Ireland and France have implemented government-supported initiatives to foster growth in the fintech sector.
Looking ahead, Brennan noted that with artificial intelligence transforming the industry and significant capital still available, the next 12 to 18 months could be pivotal for fintech in Europe. He remarked, “The next wave of fintech success stories will likely be built on sound financials rather than rapid revenue growth alone. The industry is shifting from unicorns to ‘half-a-corns,’ with £500 million valuations becoming the new benchmark.”
As the fintech landscape evolves, it remains crucial for companies to adapt to changing market conditions and investor expectations to secure funding and drive future growth.