FinTech investment growth in the Baltics paused in Q1 due to lack of large deals

FinTech companies in the region raised just $11.2m across 12 deals during the first three months of 2021

  • The FinTech industry in the Baltics recorded strong growth in deal activity between 2016 and 2018 as the number of transactions increased from 21 to a record high of 59. Funding peaked at just over $600m in 2017 driven by large transactions as Coinverco, a crypto investment management and trading platform, and 4finance, an online lending group, raised $120m and $325m, respectively.
  • Despite being a small market, the countries in the region – Latvia, Lithuania and Estonia – possess a high level of technology penetration which has produced a disproportionally high number of tech hardware and software startups. As such the ecosystem showed resilience in the face of the pandemic and after a slowdown in 2019 FinTech funding grew 3.8x to $175.3m. Deal activity also picked up from 41 deals in 2019 to 45 transactions in 2020.
  • Deal activity in 2020 showed strong signs of growth with each quarter seeing more deals than the previous one and funding peaking at $120.1m during Q4. However, that trend was disrupted as the first three months of 2021 saw only $11.2m invested, the second lowest figure in the last five quarters. Deal activity also subsided to 12 transactions, however remained above the levels recorded during Q1 2020 when only 8 deals were completed. As a result, 2021 still could be a strong year for the FinTech industry in the Baltics given funding is heavily dominated by small numbers of large deals.

Estonian companies completed seven of the ten largest FinTech deals in the Baltics since January 2020

  • The top ten FinTech deals in the Baltics completed between 1 January 2020 and 31 March 2021 collectively raised $162.2m, making up 86.52% of the overall investment in the region during the period. The high levels of concentration of capital in large deals is normal given that the average deal size in the Baltics since the start of last year was just $4.9m.
  • Estonian companies took seven spots on the list with Veriff, a global identity verification service company, closing the largest deal in the country. The company raised $15.5m via a convertible note from NordicNinjaVC, Change Ventures, Mosaic and Y Combinator. Veriff will use the funding to expand sales to enterprise customers before it raises a larger Series B round in the future.
  • The largest deal during the period completed by SME Finance, an online invoice finance company based in Vilnius, which collected €80m in debt financing from European Investment Bank in October 2020. The company will use the investment to meet the working capital financing needs of enterprises through its self-service factoring platform. SME Finance also stated it is planning to launch a neobank for business clients, which it intends to have operational by mid-2021.

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2021 FinTech Global

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