The first half of 2024 has witnessed a significant decline in spending within Ireland’s fintech industry, reflecting cautious investor sentiment.
Total investment plummeted by 90% year-on-year, dropping from €212 million to just €22 million, as reported in the annual State of European Fintech report published by Finch Capital. While venture capital and buyout funding in Ireland remained relatively stable, there was a notable 40% reduction in average fund sizes.
The largest deal in the first half of the year was a €10 million funding round for Zartis, a software consulting firm based in Cork. It is important to note that the report does not include the acquisition of Dublin-based SoftCo by private equity firm Keensight Capital, a deal estimated to exceed €100 million.
This report arrives a year after the Irish lobby group Financial Services Ireland urged for increased state support for the fintech sector, including the establishment of a national fintech center.
Finch Capital attributes the decline in Irish fundraising to broader market trends across Europe, characterized by economic challenges and a cautious approach from investors. Total capital invested in European fintechs dropped by a quarter, from €3.8 billion to €2.9 billion.
If confidence returns, funding levels and deal volumes could see a recovery, according to Finch Capital. Mike Brennan, a partner at Finch Capital, stated, “The challenges that fintech faced in 2023 were necessary for the sector to mature and become more sustainable.”
Despite the overall decline in funding and a slowdown in the pursuit of unicorns, Brennan emphasized that there are ample opportunities for companies that are capital-efficient and have a clear path to profitability. He further noted, “With AI transforming the industry and significant dry powder still available, the next 12-18 months will mark a turning point for fintech in Europe. The next wave of fintech success stories will likely be built on sound financials rather than rapid revenue growth alone.”
Discover new challenges and opportunities that artificial intelligence brings to the banking sector at Finextra’s first NextGenAI conference on November 26, 2024. Register your interest here.