European fintech funding drops 70% in first half of 2023

Fintech funding in Europe has been greatly affected by the challenging economic environment, the latest report by Finch Capital has found. Specifically, startups in the sector raised a total of €4.6bn in the first half of 2023 — down 70% from €15.3bn in H1 2022.

“Since mid-2022 we have seen an increase in investment discipline in public and private markets, resulting in less funding, lay-offs, less IPOs, flight to quality, and focus on capital efficiency,” said Radboud Vlaar, Managing Partner at Finch Capital.

Amid this increased funding discipline, this year’s first half has seen a 48% decline in the number of deals (434 in total) alongside an 84% decrease in M&A transaction sizes, compared to the equivalent 2022 levels. On the bright side, overall M&A activity fell only by 5% with volumes to match those of the past year.

Meanwhile, although the top 20 funding rounds are back to pre-2020 levels, investment dropped the most for the rest, which accounted for less than 40% of the total deal volume. Startups in the Series A to C stages have felt the heaviest impact. In contrast, seed rounds continued to attract funding.

Slide from the State of European Fintech Report 2023