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Small FinTechs in UK at risk from funding collapse

Hardman & Co

Almost three-quarters of smaller UK FinTech companies have a cash runway of half-a-year, while even more are worried about their next funding round. Most are considering diversifying their revenue to combat this, while one-tenth are looking into winding up their business altogether. 

Before 2020, the start-up economy seemed to be endlessly booming, with investors willing to throw money at new projects in record rates, in the hope of backing the next unicorn – a start-up worth over $1 billion – especially in the world of finance. Financial technology funding has continued to boom in the UK, with the country seeing investment in the sector at the start of 2019 almost doubling on the levels seen over the first six months of 2018. 

FinTech is technology which aims to compete with traditional financial methods in the delivery of financial services. It is an emerging industry that uses technology to improve activities in finance. However, while in times of relative economic stability there was a big appetite for such things, as investors scale back on big projects during the current financial downturn, this particular bubble seems to be bursting. Underlining the fragile nature of smaller start-ups, a new study from Innovate Finance has found that nearly 70% of smaller UK FinTech companies have a cash runway of just six months or less. Compounding this, the survey of 126 FinTech start-ups – of whom 61% had fewer than 25 employees – 77% said they are worried about their next funding round. In order to boost income and preserve their brittle existence, most firms are currently looking to change tack in the coming months. The vast majority of respondents haven’t received funding since the start of the Coronavirus lockdown. Of those that have, the majority came from Angel investment. 

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