Europe’s fintech startups to watch

Europe’s fintech sector has taken a hit amid the downturn and has seen a significant drop in both the number and value of venture deals.

So far this year, just €136 million has been invested in 19 European fintech deals, according to PitchBook data. While it is too early to say whether activity will pick up again this year, investors expect fintech deals to fall short of previous records and valuations to suffer.

“As we enter 2023, the situation for cash-starved fintech companies is likely to become even more challenging,” said Stefan Tirtey, managing partner at fintech investor CommerzVentures. “Many of the internal investors who have gone into internal rounds will have maxed out their reserves, so companies will need to find new investors externally who are likely to be more selective. We expect to see an increasing number of down rounds, distressed sales and exits. ”

Nevertheless, there is still plenty of capital in the market waiting to be put to work, and investors will surely be on the lookout for startups that can buck the current trend. We reached out to five VCs active in the fintech space and asked them to share their thoughts on two startups—one in their portfolio and another they’re eyeing.

Stefan Tirtey
Managing Partner, CommerzVentures (Frankfurt) Elwood “Elwood offers a full-stack platform that enables all types of financial institutions to access, trade and manage exposure to digital assets. The comprehensive solution covers pre-trade, trade and post-trade. The British company has experienced phenomenal growth during 2022 despite the headwinds for fintech in general and crypto in particular.” Carbon Future “Germany-based Carbon Future is a promising company at the intersection of fintech and climate technology. Through their platform, companies can build credible, long-term and diverse carbon removal portfolios, helping them neutralize carbon emissions and reach their net-zero commitments.

“Customers such as Microsoft, Swiss Re and Klarna work with Carbon Future to provide certified and auditable carbon removal credits. We expect exponential growth in the technical carbon removal space, where Carbon Future is a key player connecting producers and buyers.”

Vinoth Jayakumar
Partner, Molten Ventures (London) FintechOS “FintechOS is a fintech infrastructure software company headquartered in London that radically simplifies the development and launch of financial products for banks and insurance companies worldwide.

“Despite the challenging macro environment, CIOs at banks and insurance companies have historically increased capital spending through downturns. We expect a similar thesis to play out – marginally increased capital spending on infrastructure software will accrue to reduce the long-term total cost of serving customers. ” Codat “London-based Codat offers fintechs and financial institutions a universal API to build connected products for their enterprise customers.

“Dissemination of customer-level financial data is the holy grail of unlocking value for customers. In this environment, it is more prevalent than ever to be able to develop and sell highly contextual financial products for SMB customers – Codat unlocks this for SMBs. ”

D’Arcy Whelan
Associate, Outward VC (London) Kita Earth “Kita offers carbon insurance for companies, reducing the risk inherent in the carbon offset market. The London-based company’s product protects buyers of carbon removal credits against under-delivery, encouraging a greater flow of finance into these projects, and essentially offsetting .

“The world is in a climate crisis, and we must reduce the purchase of carbon offsets for companies. Kita is not only a category leader, but an example of a company that creates a completely new category and is the first of its kind to offer this type of solution.” Supercede “Also based in the UK, Supercede provides reinsurance software for cedants, brokers and underwriters, helping them to collaborate and trade more efficiently, from the preparation of reinsurance programs right through to placements.

“The reinsurance market is huge and it’s crazy how slow the industry is when it comes to digitization and automation. Given what’s happening in the world with geopolitical and environmental risks, this is the time when … insurers and reinsurers need to think about how technology can help them with saving on costs and time. Supercede already works with some of the biggest insurance companies and brokers on the market, and in this industry it only takes a few big names to turn the rest of the market’s head.”

Oliver Hammond
Investment Director, Fuel Ventures (London) Volt “London-based Volt is a global gateway for open bank payments, driving the growth of real-time payments worldwide. Even in 2022, they were growing incredibly well, and by the end of the year they were processing €30 million per month in payments representing an increase of 40% from year to year.

“I think payments as a business will continue to do well this year. From an online perspective, payments are not slowing down. People may change what they spend their money on, but the movement from high street retail to online retail continues to increase.” ComplyAdvantage “We are quite confident about B2B fintech for this year, especially in the compliance space. Companies like London-based ComplyAdvantage are going to do very well in this market because people are much more focused on proper anti-money laundering checks and KYC .

“Companies are more reluctant to take on high-risk clients, and I think they’re going to invest more money and time in making sure the people they’re working with are clean and legitimate.”

Nicholas Sando
Fintech investor, Octopus Ventures (London) Minimum “Minimum is a carbon management platform built for corporate customers. Measuring and managing scope 1-3 carbon emissions is particularly difficult for complex organizations. The London-headquartered company has solved this by building a simple system to provide total visibility of emissions and control over all aspects of carbon management.

“2023 is shaping up to be a very interesting year for climate regulation as the Fit for 55 package puts pressure on regulators. The package includes proposals to reform high-profile schemes such as cap-and-trade as well as cracking down on carbon leakage through offshoring of carbon-intensive activities. These reforms will continue to pave the way for one of the most exciting opportunities in the fintech investment space.” Bound “Bound is an easy-to-use foreign exchange (FX) management tool aimed at scaling technology companies. Ninety-four percent of FTSE 500 companies hedge against currency risk, compared to just 4% of UK SMEs. Bound strengthens the financial decision-makers of small and large technology companies for to reduce currency volatility in a reasonable and simple way.

“It feels like we can continue to expect significant currency volatility due to economic and political actions next year. We think the fintechs that solve currency risk for small and large companies will have a fantastic year through 2023 as they continue to solve an acute pain felt by most businesses involved in international trade.”

Featured image by Alones/Shutterstock

This article originally appeared on PitchBook News