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KPMG鈥檚 latest Pulse of Fintech report revealed that global fintech investment has fallen to its lowest level since 2017.

In the UK, the same trend followed, as research revealed that investment in fintech dropped by more than 25% year-on-year, its weakest level since the height of the pandemic.

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Fintech Innovation Stands Strong

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But whilst investment is down across the fintech sector, innovation is definitely on the rise.

According to Statista, By December 2024, the UK was home to 3,316 fintech companies, an increase from the previous year. The Data City also found a growth rate of 20.8% for the UK鈥檚 fintech sector, suggesting it could be worth over 拢190 billion by 2026.

But these startups aren鈥檛 just growing, they鈥檙e exploding. According to Tenity, as of June 2024, the UK is home to 52 of Europe鈥檚 121 fintech unicorns. That鈥檚 nearly 50%!

And whilst lower levels of funding can be a signal of hard times, they definitely shouldn鈥檛 be a deterrent for founders looking to build something great.

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Funding Options For Fintechs

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When it comes to founding and growing a fintech business, VC capital isn鈥檛 the only route to success. In fact, many founders are now bootstrapping their businesses to allow them to build their companies when investment is down.

Bootstrapping is popular because it allows founders to retain control and build at their own pace, without relying on external factors.

But what is the best route for growth? Is it better to be backed or to bootstrap?

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The Argument For Bootstrapping

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Bootstrapping refers to starting a business without any external funding. Commonly, founders will use their own money to grow their companies, prioritising resourcefulness and control over scaling fast with capital.

Bootstrapping is popular for a number of reasons 鈥� including the fact that it doesn鈥檛 actually rely on securing external funding. This means that founders don鈥檛 need to rely on VCs to help them start their companies 鈥� which is particularly useful in times of lower investor confidence.

Not only that, but bootstrapping allows founders to retain full control (and equity) in their company.

One example of a company that did this successfully is Clear Junction.

鈥淲e built Clear Junction without external capital,鈥� says Dima Kats, CEO of Clear Juncion 鈥淚t forced us to focus on real value, not vanity metrics.鈥�

But that鈥檚 not to say that bootstrapping is right for every company. For many, external funding is the key to success.

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The Argument For Funding

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Whilst bootstrapping is certainly a useful tactic in times of lower investor confidence, it doesn鈥檛 mean that fundraising is the wrong move.

In fact, for many fintech founders, securing funding helps drive their businesses 鈥� and fast.

鈥淲e had no time to lose,鈥� says Babs Ogundeyi, CEO of Nigerian neobank Kuda听鈥淢illions were excluded from the financial system. Venture funding helped us build quickly with other knowledgeable and experienced people to meet urgent needs.鈥�

But raising capital isn鈥檛 just about money. VCs can also provide useful networks, experience and support 鈥� helping founders propel their visions faster than they would have been able to alone.

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So, Which Is The Best Way?

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Whilst there is no 鈥榦ne size fits all鈥� answer to this funding conundrum, it鈥檚 important for founders to weigh up the pros and cons.

When capital is tighter, founders shouldn鈥檛 just be asking themselves 鈥楥an I raise capital?鈥� but also 鈥楽hould I?鈥�.

Bootstrapping is a good option for companies that:

• Are revenue generating from early on, allowing them to re-invest funds easily back into the company.
• Are in spaces where competition is lower.
• Do not want pressure or input from investors.

Fundraising however might be better for companies that:

• Are targeting a big market and need to move quickly to assert dominance.
• Want to make early hires to expand quickly.
• Need to build something complex before generating revenue.
• Want external input from investors and partners.

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Fintech in 2025

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The fundraising climate might be more difficult, but that doesn鈥檛 mean founders should give up.

In the words of Dima Kats: 鈥淚t鈥檚 not about who raises more. It鈥檚 about who builds something that lasts.鈥�

To hear both founders debate the topic further at Money 20/20 Europe, head to Bootstrapping vs. Backers: The Fintech听Funding Showdown, 11:30am鈥�12:00pm on Thursday 5th June.