Capital is the lifeblood of fintech start-ups. The most successful are characterised by their ability to both raise funds and then manage burn rate each month. In terms of capital raising and managing expenditure, the 2018 FinTech Census found:
Increased Capital Available in Australia... The levels of capital available to high-growth businesses in Australia continue to rise. In FY18, the financial year saw the fintech sector recording 111 fund raisings*, with an average value of just under $9m4. In fact, according to Techboard’s Australian start-up funding report: “Fintech companies featured very prominently in the report, accounting for $988m of funding events over the financial year, making Fintech the most funded category of companies overall”. The evidence shows that the ability of fintechs to raise greater amounts of capital is increasing overtime.
Mixed capital raising success... Although successfully funded fintechs (51%) far outnumber those that fail to raise capital (4%), or couldn’t raise what they desired (4%), this doesn’t account for organisations that may not be in existence anymore. Views in this Census were primarily collected from existing fintechs, skewing to organisations that were successful in capital raising. Fintechs that have managed to access commercial funding are more likely to have raised the amount of capital required.
Increased Average Raisings... Of those fintechs that have successfully raised capital to date since their inception, on average each has raised $4.5m. This is an increase on what was seen in the last two years ($3.9m in 2016 and $4.1m in 2017), reflecting the maturing industry. Fintechs in existence for three or more years have on average raised $5.95m of capital to date, compared with $1.8m for younger fintechs. If we look specifically at the last round of capital funding, we see a gradual average increase over the last three years ($3.01m in 2016, 3.02m in 2017 and $3.20m in 2018).
Private funding dominates... As we saw in the prior two years, most fintechs in Australia have received private funding (70%). Six in ten (63%) also accessed commercial funding and on average have raised $5.1m in capital. This is greater than the average amount of $3.4m raised by fintechs that exclusively accessed private funding.
The source and type of funding has been varied, with a significant amount of debt funding being made available by non-banking lending companies, as well as the emergence of the Initial Coin Offering (ICO) as an alternative funding option. The sector has seen a slight decrease in activity from corporate venturing versus from other private sources (including other venture capital firms). The ongoing strength of private funding rounds highlights continuing investor appetite to support the fintech sector.
Alternative funding access begins... Changes in the funding landscape through the introduction of equity crowdfunding and other wholesale platforms has opened up new avenues for early stage fintechs to raise seed capital. This has risen due to legislation changes over the past 18 months that have been welcomed by fintechs and investors.
Post revenue stable... While a relatively high proportion of new participants joined our research this year, the results still show that a similar proportion to last year are “post revenue” (57% in 2016, 71% in 2017 and 68% this year).
Realising profit... One in five (19%) fintechs are currently profitable, marginally higher than 14% of fintechs that were profitable in prior years. Of those that have not started to realise profit, their current burn rate is on average $121k a month. This has gradually been increasing over the last two years ($84k in 2016 and $115k in 2017).
Managing burn rate... Average burn rates are particularly high among fintechs that have received funding to scale up their business, with the increased burn rate reflecting the maturing of Australian fintechs. While 32% of fintechs have a monthly burn rate in excess of $100k, the majority of these businesses are skewed towards larger, more funded fintechs that have raised more than $10m in capital to date.