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Majority of early stage fintechs have cash runway of just six months

Majority of early stage fintechs have cash runway of just six months

Nearly 70% of smaller UK fintech companies have a cash runway of just six months or less and 77% are worried about their next funding round, according to a survey conducted by Innovate Finance

The study, conducted among 126 fintech startups of whom 61% had fewer than 25 employees, found that 60% are looking at adapting their strategy in order to survive the pandemic. Most are considering diversifying their revenue (32%) or pivoting the business (30%), while 11% are looking at closing or mothballing the business, underlining the fragile nature of smaller start-ups.

Smaller businesses surveyed are more worried than larger firms about their next funding round, and said this was a direct result of Covod-19, while only nine fintech said it wasn't. The vast majority of respondents haven't received funding since the start of of the Coronavirus lockdown. Of those that have, the majority came from Angel investment.

Recent research by CBI Insights found the Covid-19 outbreak has had a significant impact on fintech financing, resulting in the worst Q1 since 2016 for fintech deals and the worst Q1 for funding since 2017.

Three-in-four of the firms surveyed by Innovate Finance have applied for Government support either through Bounce Back loans of furloughing.

However, Charlotte Crosswell, CEO of Innovate Finance, says that many fintech companies have been unable to take advantage of current government schemes due to their growth profile

“It’s evident that the fintech sector faces a significant funding gap as a direct result of Cocid-19," she says. "We need to act fast before it’s too late. If we fail to address this, we risk losing many companies in the fastest-growing sector in the UK economy. We cannot turn our backs on the startups now or we will pay the price later down the line."

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