No, the fintech ‘bubble’ isn’t bursting

By Sarah Gill | 9 March 2016

Is the fintech bubble bursting? No. Not according to investors speaking across numerous panels and in interviews at the #execfintech conference in Frankfurt this week.

Speaking on the topic of the future of fintech, investor and advisor Nasir Zubari said not only is the bubble is not bursting, but that talk of there being a bubble in fintech at all is “over hyped”. He said that though the fintech hype cycle is not over, 2016 will start to see maturity of the hype cycle and a shake-out of some companies in the space: “This is where people start to get serious.”

Speaking later in the day, Christian Nagel, managing partner at Earlybird Ventures in Berlin said there was “no evidence” of a bubble bursting in the sector. Their comments were also echoed by the managing director of CommerzVentures (the corporate investment arm of Frankfurt-based Commerz Bank), Patrick Meisberger.

Zubari also pointed to the general hype around ‘fintech’, which exploded as a term used by media and investors a couple of years ago, despite that fact that financial technology has actually been around for years.

No need to panic

“It’s really easy: there is no bubble,” says Meisberger. “A bubble is where something is totally exaggerated and that then leads to a bust. What we’ve seen in the past few years is a big influx of money to fintech companies. The description of ecosystem has become better with labels like fintech and insurtech – those are new trends - but overall I do not see a bubble. That said, he says CommerzVentures has passed on ventures “quite often” in the past 12 months that have been too highly valued.

“In this phase where people are getting a bit more careful, funding rounds will take longer and some will fall apart but in the end the good comps will still get funding – there is no need to panic,” says Meisberger.

He points out that the situation in the US, a vastly more mature and well-funded tech industry, is totally different to Europe. He’s bullish on the long term prospects of US companies like OnDeck and Lending Club, which have seen their valuations fall since going public, saying it’s more likely a correction than a bubble that will lead to multiple companies going bust. Europe hasn’t seen such high valuations, so it won’t see such a strong correction.

Shout louder, but not too loud

While some companies may have been over-valued in recent times, broadly speaking European fintech ecosystems (excluding London) could benefit from shouting about their successes more was another point investors agreed on.

“We see a lot of founders presenting themselves and UK teams do so with more confidence and US teams even more so,” says Susanne Chrishti, CEO and founder of angel investment network Fintech Circle. “European startups are often more humble and underplay their own merits – it’s a cultural thing that we are trying to address.”

Zubari pointed to London’s powerful marketing and advertising muscle, saying “London does shout louder than everyone”. Formerly a partner at fintech studio Finleap, he says he’s impressed by German companies’ execution, but suggests they could do more on the marketing side – from startup to corporate level.  

In Germany it’s Berlin that takes the lion share of attention when it comes to tech startup hubs, due in no small part to the aggressively ambitious company building activities of Rocket Internet. That includes fintech companies, with companies like Number 26 and SumUp based in the city as well as Rocket's Payleven and Lendinvest, but different cities are strengthening their credentials with Hamburg-based Kreditech picking up USD92m in September last year and proving that fintech businesses can be scaled in cities outside the capital. 

Germany is second only to the UK in terms of attracting VC fuding for fintech in Europe, with a new report from Tech.EU previewed at the event saying that the two countries accounted for nearly 85% of total funding in European fintech last year.

Of course, conferences and community building events like ExecFintech play an important role in shining a light on particular tech hubs. Now in its third year, this invite-only conference is part of a new wave of startup ‘unconferences’ attempting to shake up staid formats and make investors, startups and corporates’ time on site as meaningful as possible by focusing on networking and connecting different players in the ecosystem - something long overdue in the finance event space. The sister conference of Pirate Summit in Cologne, the approach is clearly striking a chord with investors, corporates and startups judging by the number of attendees packing out the panels and networking spaces. 

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