The last KPMG Pulse of Fintech report revealed that Fintech’s global investment has fallen to its lowest level since 2017.
In the United Kingdom, the same trend followed, since the investigation revealed that the investment in Fintech fell by more than 25% year -on -year, its weakest level since the pandemic peak.
Fintech Innovation remains strong
But while the investment is decreasing throughout the Fintech sector, innovation is definitely increasing.
According to statista, in December 2024, the United Kingdom housed 3,316 Fintech companies, an increase with respect to the previous year. Data City also found a 20.8% growth rate for the Fintech sector of the United Kingdom, a suggestion that it could be a destination of more than 190 billion by 2026.
But these new companies not only grow, they are exploiting. According to Tenity, as of June 2024, the United Kingdom is home to 52 of the 121 Fintech Unicorns of Europe. That is almost 50%!
And while the lowest financing levels can be a signal of difficult times, they should definitely be a deterrent element for founders who seek to build something great.
Finantechs financing options
When it comes to founding and cultivating a Fintech business, VC Capital is not the only route to success. In fact, many founders are now starting their businesses to allow them to build their companies when the investment is low.
The start is popular because it allows founders to retain control and construction at their own pace, without depending on external factors.
But what is the best route for growth? Is it better to be backed or bootstrap?
The plot for the boat
Bootstrapping refers to starting a business without any external financing. Commonly, the founders will use their own money to grow their companies, prioritizing ingenuity and control over the rapid scale with capital.
Bootstrapping is popular for several reasons, including the fact that it does not depend real on obtaining external funds. This means that the founders do not need to trust VC to help them begin their companies, which is particularly useful in times of less confidence in investors.
Not only that, but Bootstrapping allows founders to retain total control (and equity) in their company.
An example of a company that did this successful is a clear crossing.
“We are building a transparent external capital,” says Dima Kats, CEO of Clear Junction “forced us to focus on real value, not the metric of vanity.”
But that does not mean that the start is suitable for all companies. For many, external financing is the key to success.
The argument for financing
While the start is undoubtedly a useful tactic in times of less confidence in investors, it does not mean that the collection of funds is the incorrect movement.
In fact, for many Fintech founders, ensuring funds helps boost their businesses, and fast.
“We did not have time to lose,” says Babs Ogundyi, CEO or Nigerian Neobank Kuda, “were excluded from the financial system. Company’s financing helped us quickly build with other knowledge and experienced people.”
But raising capital is not just about money. VCs can also provide useful networks, experience and support, helping the founders to boost their visions faster than they could have alone.
So what is the best way?
While there is no response of ‘unique size’ to this enigma of financing, it is important that the founders sopese the pros and cons.
When capital is stricter, the founders should not ask “can I raise capital?” But also ‘should?’
Bootstrapping is a good option for companies that:
- Income is generated from the beginning, which allows them to invest back on the return funds to the company.
- They are in spaces where competition is lower.
- Do not want pressure or contributions from investors.
However, fund collection could be better for companies than:
- They are pointing to a large market and need to move quickly to affirm the domain.
- Because making early hiring to expand quickly.
- You need to build something complex before generating income.
- Because external contributions of investors and partners.
Fintech in 2025
The fund collection climate could be more difficult, but that does not mean that the founders should surrender.
In the words of Dima Kats: “It is not who increases the most. It’s about who builds something that lasts.”
To listen to both founders to discuss the issue even more in money 20/20 Europe, go to Bootstraping vs. Backers: The Fintech Financing Showdown, 11:30 am to 12:00 pm from Thursday, June 5.
