Start-up funding for FinTech companies

The Covid-19 pandemic has greatly affected the property sector, with traditional methods involved in buying, renting or selling property no longer working. As a consequence, there has been an increased demand for digitization in the PropTech sector and businesses raising funding from all avenues.

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What is FinTech?

PropTech is short for Financial Technology. The goal of organizations within this industry is to improve the delivery of financial services through the use of technology. FinTech became popular with the rise of online banking, and companies often aim to help businesses optimize their financial operations.

FinTech is now popular for customer-oriented services, whereas it was originally only used in the company’s own systems. While FinTech companies are currently most profitable within the banking sector, they have now expanded to include the use and development of cryptocurrencies.

Where do FinTech companies find funding?

FinTech companies can raise funding through traditional means such as organizing funding rounds or crowdfunding campaigns. Both angel investors and venture capitalists can invest in FinTech companies, but there are also schemes available to provide funding specifically for the FinTech industry. These schemes can be organized by the authorities or other institutions that wish to support start-ups in the sector.

How do startups traditionally raise funds?

Startups, including those in the FinTech industry, can raise funding by running crowdfunding campaigns and funding rounds. Initially, the founders of a company usually invest their personal savings, referred to as the pre-seed funding round.

The seed funding round is the next funding round to take place. During this round, several investors can inject capital into a business, such as venture capitalists, angel investors or friends and family of the founders. Series rounds, referred to as AD funding rounds, are the next to follow. A company can continue to run these funding rounds until they have generated all the investment they need.

Angel investors will invest in a company in return for shares, meaning they will have a percentage of the company and thus the profits. These are high net worth individuals who will search for companies that they believe have the potential to generate large profits.

Venture capitalists are private equity companies that seek to invest their company’s funds in startups that seem promising. They usually invest in a startup in return for stock. The main difference between venture capitalists and angel investors is that venture capitalists will have access to any liquidated assets if the startup goes bankrupt.

Companies can also run crowdfunding campaigns to raise funding. These campaigns have the ability to attract customers and investors at the same time as they take place online and can therefore attract a large number of people at once.

Where else can FinTech companies raise funding?

FinTech companies will be able to access funding from specific organizations or institutions specific to their industry. The UK government offers a funding scheme called the Future Fund, which supports startups in the FinTech industry. The scheme was established during the Covid-19 pandemic, and the funding invested comes from the British taxpayer.

This consequently means that the UK taxpayer now owns shares in every company that has received an investment so far. 25 companies have received an investment through this scheme so far, and the Future Fund plans to continue accepting regular applicants for funds.

What do FinTech companies use funding for?

FinTech startups can use funding for traditional means, such as conducting market research and product development alongside hiring staff or making purchases of assets that the company needs to move forward.

Companies operating within the FinTech industry will also use funding to obtain the necessary licenses and documentation required. In addition to this, companies will also use the funds to develop new technology and obtain authorizations to integrate any software with external organisations.