Fintechs increasingly turn to crowdfunding amid VC funding decline
- Venture capital funding for fintechs in the UK has not recovered to pre-pandemic levels, with 2024 showing a slight increase yet still trailing behind 2021 and 2018 peaks.
- Companies like Bloom and Zero are leveraging crowdfunding as an alternative funding source due to decreased VC interest in consumer-facing fintechs.
- As traditional VC funding remains uncertain, fintechs are adapting by exploring crowdfunding and government-backed investments to secure necessary capital.
In the UK, the fintech fundraising landscape has faced significant challenges as traditional venture capital funding has not recovered to pre-pandemic levels. As of 2024, global investment has shown some positive trends in funding amounts, but the venture capital (VC) funding remains behind its 2021 peak and has not yet reached levels from 2018. Due to this unstable environment, fintech companies are exploring alternative funding avenues such as crowdfunding. Crowdfunding has seen a notable decline in participation since its peak in 2021, yet there are indications it could be on the verge of resurgence as fintechs seek new opportunities for capital. Consumer-focused fintechs particularly recognize this method as vital in light of diminishing VC interest in their segments. Notable instances of this trend include firms like Bloom, which aims to show potential to VCs by engaging their community through crowdfunding campaigns, and Zero, an environmentally sustainable banking alternative that successfully utilized crowdfunding to raise part of its recent funding round. Furthermore, government-backed funding options in areas such as Canada and Wales are becoming increasingly appealing, where development banks can invest equity into fintechs, helping them maintain a presence in the local markets. This approach necessitates significant physical presence within those regions, making strategic decisions about location critical for fintech leadership teams. Overall, as VC funding remains unpredictable, the adaptability of fintech entrepreneurs in seeking out diverse funding sources demonstrates their resilience and innovative spirit, marking a shift toward alternative financing strategies.