Third of UK fintechs have lost vital funding due to equity management problems

Qadre, a high-growth fintech trusted by leading institutions to deliver certainty with blockchain technology, today announced a new research report in partnership with techUK that reveals a third of UK fintechs have lost vital funding due to equity management problems. The report ‘Making fintech work for fintechs’ is based on a survey of 59 UK fintech founders and exposes the impact of complex equity management processes on business growth as well as the impact of COVID-19 on fundraising.

The UK is one of the world’s most successful fintech markets, notching up $4.9 billion of capital raised in 2019 (Innovate Finance, 2020). This surpasses 2018’s figure of $3.6 billion as the UK moved up to second in the global rankings for VC investment into fintech. Yet despite the UK’s successful fintech scene, fintech founders are struggling with equity management which is limiting growth, holding back innovation, and draining operational resource. COVID-19 is presenting additional challenges to the industry, fintech founders are looking for ways to accelerate processes, reduce costs, and focus on growing their business.

The key takeaways from the report include:

Equity management is holding back UK fintech: More than two thirds (67%) of fintech founders believe equity management is a distraction and that time spent on managing cap tables is better spent on more important tasks. 59% report having to delay projects and 32% have lost out on funding due to inefficient equity management. Worryingly, 61% of founders believe that time spent on equity management has impaired their ability to deliver a product or scale their business. The net effect is that equity management challenges could be costing the UK fintech industry as much as £2.6bn in missed funding.
Founders are relying on Excel to manage high-value deals: 73% of fintech founders are using Microsoft Excel or Google Sheets for cap table management, with nearly a third (31%) finding this process very painful or painful. 64% of founders think that a digital platform to build and manage cap tables would make lives easier and save time. Fintech founders are burdened by outdated methods of managing equity and in desperate need of technology and guidance that can save them time and money.
Over £1bn of fintech investment could be lost because of COVID-19: 68% of fintech founders have reported missing out on important funding because of the COVID-19 crisis. The average amount lost by fintech businesses to date is approximately £1.2m. As the UK is home to over 1,600 fintech companies, it means an estimated £1.9bn of investment has been lost across the industry because of the crisis. With a huge economic toll on the sector expected, fintech founders want to simplify equity management processes to help them better manage their business.
“The UK has one of the world’s most successful fintech markets, but company founders are facing unprecedented economic headwinds with COVID-19 at the eye of the storm,” said Nick Williamson, CEO of Qadre. “At this time of uncertainty, equity management processes are preventing fintechs from raising money, delivering new services, and growing their business. Equity management isn’t just inconvenient, it is damaging UK fintech. It has never been more important for fintechs to streamline unnecessary tasks and focus on developing products and services that can help them ride out this storm.”

“At the heart of the fintech industry is the promise of innovation to create financial services that eliminate complexity, provide an intuitive user experience, and create value for consumers and businesses alike. This report highlights that there is space to replicate this in equity management,” said Julian David, CEO of techUK. “Fintech organisations must address the need to better support the startup community to improve efficiency and generate company growth. The dearth of solutions that address equity management is often overlooked. This study reveals the impact it can have on wider company success.”

‘Making fintech work for fintechs’ a report by Qadre, in partnership with techUK, can be found here.

Author: Chloe Butler

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