What now for Europe’s FinTechs?

Andy Bell warns on unprofitable Fintech investment platforms

Almost two years ago I wrote about the state of the European Fintech scene, following a stark warning from Andy Bell, the founder of the D2C investment platform that bears his name, AJ Bell. Mr Bell sounded the alarm about levels of profitability in the fintech space which he described as frightening.

He also chastened unprofitable start-ups with the comment that:

“AJ Bell made a profit in its first month and has made a profit every single month in its existence – I think that’s (seen as) old-fashioned nowadays”

Andy Bell highlighted that funding for fintechs appeared to be drying up, leaving companies that were not likely to become profitable near term, with some stark choices.

So what does the fintech scene in the UK and Europe look like now?

Are we any nearer to profitability for the majority of businesses in the space?

As recently as 2021 Venture Capital funds and others invested $28.90 billion into the European Fintech market. However, by 2023 that figure slumped to an annual investment of $8.40 billion, a drop of some -70.0%.

Things didn’t improve much in 2024 with around $8.70 billion of fresh money being invested into the space.

That meant that, though money was still available to start-ups it was far harder to come by. And that owners and entrepreneurs had to have an even better story to stand out, in what had increasingly become, a buyer’s market.

In turn that often meant having an AI narrative to tell and sell to access funding

It’s perhaps no surprise that many of the leading lights of the start-up scene in the UK and Europe now are based around collaborative and intelligent workflow and more recently the use of AI agents. For example, V7Labs and Poly AI.

The closure of Andreessen Horowitz’s much-vaunted London office, announced in January of this year, was a clear indication of just how much the market for VC investment in European Fintech had changed.

Far fewer new unicorns

Just 14 start-ups across Europe achieved unicorn status in 2024, barely unchanged from 2023, and down by -70.0% on the 2022 figures.

The fact that this number tallies exactly with the drop off in funding, tells us that few if any of these startups have reached unicorn status, through any kind of organic growth.

It’s not without irony that billion-dollar startups were named after a mythical creature that only exists in fairy tales and our imagination.

Are there any new unicorns in prospect in 2025?

There are UK and European startups with Unicorn potential out there (they are known as “soonicorns” apparently).

PolyAI, which was one of 2024’s success stories, reached a post-money valuation of just under $465.0 million. After it secured $50.00 million in series C funding for its fully automated AI call centre systems The company is tipped by the pitchbook to reach a billion-dollar valuation in 2025.

Quantum computing start-up Pasqal is another. The French company is trying to build the next generation of computers based on the work of its co-founder, Nobel Prize winner Alain Aspect.

Pascal has partnered with corporate heavyweights Credit Agricole and Johnson and Johnson, among others. The company raised $100.0 million in a series B round in early 2023 that was led by Singapore’s Temasek.

Despite these positive stories and others like them, the economic reality for Europe’s unicorns is still unprofitable.

Most unicorns don’t make money

Research by sector specialists Sifted, Bitpanda and SumUp. found that just 13 European Unicorns had reached profitability.

Among those that had were Austrian crypto exchange Bitpanda, Sweden’s buy now pay later app Klarna UK challenger banks Monzo and Clearbank alongside digital loans platform Lendable and OakNorth (the bank start-up has been profitable for 8 years, this is its10th year of operation).

Other profitable names include German deposit broker and comparison app Raisin, and the Dutch banking and investing platform Bunq.

Encouraging as these stories are, Sifted lists 159 European unicorns in its data tables, meaning that less than 10.00% of the continent’s billion-dollar start-ups are making money.

Research suggests that VCs are now looking for start-ups with a clear route map to profitability and they are prepared to pay up to invest for the right story. The average Enterprise Value to Revenue multiple for European Fintechs is around 12.50 times and compares to an average of 4.22 times for stocks in the S&P 500 Financials sector.

Future valuations and multiples

The possible IPO of Klarna and Revolut this year would provide some insight as to the potential exit multiples and appetite among public rather than private markets on either side of the Atlantic.

Quite where this leaves the other 146 unprofitable European unicorns remains to be seen.

Andy Bell’s 2023 comment that:

“Over the next two years, as private equity capital dries up for these guys, and they’re still on a cash burn, I’m not sure what happens at the end of the runway”

Could become a reality for many you feel.