Fintech funding declines in Switzerland

In the first half of 2022, fintech companies in Switzerland raised a total of CHF 349 million across 23 rounds, falling behind sectors including information and communication technology (ICT) and cleantech, data from Startupticker.ch’s Swiss Venture Capital Report 2022 Update shows.

The figures show a decline in fintech funding in H1 2022, with the sector only accounting for 13% of all start-up funding and 14% of deals. In comparison, Swiss fintech companies raised CHF 857.9 million of the CHF 3 billion closed by Swiss startups in 2021, giving the sector a market share of 28% of all invested capital for the year.

Swiss Venture Capital Funding by Sector, Source: Swiss Venture Capital Report 2022 Update, Startupticker.ch

The decline in fintech funding is further evident when you consider that H1 2022 was a record period for Swiss start-up funding. In the first half of the year, Swiss startups raised a total of CHF 2.6 billion through more than 160 rounds, a ~50% year-on-year (YoY) increase in volume and 31% YoY increase in number of deals.

Investments in Swiss startups in the first half of the year, Source: Swiss Venture Capital Report 2022 Update, Startupticker.ch

Investors favor cleantech and healthcare

Startupticker.ch’s Swiss Venture Capital Report 2022 update shows that investors moved away from the fintech sector in H1 2022 to bet on other industries, including cleantech, healthcare and micro and nanotechnology.

This is proven by large rounds closed by startups such as Climeworks (CHF 600 million), a company specializing in carbon dioxide air capture technology; MindMaze (CHF 96.7 million), a digital neurotherapeutic platform; DistalMotion (CHF 82.6 million), a medical device company; and Immunos Therapeutics (CHF 71.4 million), a biotechnology company.

Climeworks was among the three Swiss startups to reach unicorn status in H1 2022, along with SonarSource, an open source software developer for continuous code quality and security, and Scandit, a smart data capture and barcode scanning software provider.

While fintech funding stalled in the first six months of the year, three fintech companies still managed to raise some of H1 2022’s largest funding rounds: SEBA Bank, a licensed banking institution focused on digital assets, closed a series C and H1 of CHF 110 million. 2022’s Fourth Biggest Round; Sygnum, another digital asset bank, secured CHF 82.4 million in the period’s seventh largest round; and Yokoy Group, a consumer management firm, raised an $80 million Series B and H1 2022’s eighth largest round.

Venture funding is cooling off

The decline in fintech funding observed in Switzerland comes amid an economic slowdown and global market selloff that saw shares of newly listed fintech companies decline by an average of more than 50% since the start of 2022, according to a Financial Times analysis.

A new report from Morningstar company Pitchbook shows that the insurtech segment took the biggest hit, with the seven publicly traded companies tracked by Pitchbook plunging a staggering 80% over the past year. Similarly, in PitchBook’s neobanking, brokerage and crypto cohort, which consists of five companies, shares have fallen 59% over the past 90 days.

This landscape has triggered a decline in fundraising for private companies and a drop in startup valuations.

Earlier this month, Swedish buy now, pay later (BNPL) giant Klarna closed an $800 million round at a valuation of $6.7 billion, down 85% from $45.6 billion a year ago. The Wall Street Journal reported last week that Stripe had lowered its internal valuation by 28% to $74 billion, compared to $95 billion last year.

Data from CB Insights shows that Q2 2022 had the lowest amount of quarterly funding and deals since Q4 2020, with only $20.4 billion and 1,225 rounds.

Quarterly fintech funding and deals, Source: CB Insights, July 2022

The deteriorating climate has led to fintech companies including UK digital bank Zopa and mobile banking startup Chime putting plans for IPOs on hold. Others such as Klarna, Robinhood and Coinbase, meanwhile, have been forced to embark on large-scale layoffs.

According to an analysis by Roger Lee of Layoffs.fyi, fintech startups accounted for the third largest number of layoffs, by percentage, globally in the first half of 2022. As of July 1, about 3,709 employees – excluding crypto companies – had been laid off over 41 ” layoff events” in the second quarter of 2022, Lee estimates.

Featured Image Credit: Edited from Unsplash and Freepik