What’s going on in Danish FinTech (2014-May 2016)
Although the rise of FinTech companies has been mostly concentrated in the usual finance and tech hubs; London, New York, and Silicon Valley, FinTech has now without a doubt broke through into the Nordics and is starting to gain momentum, with over $390m invested in the last two years alone which puts the Nordics second in European FinTech investment after the United Kingdom.
While the majority of this investment has taken place in Sweden (2 of 3 FinTech investments were in Sweden), the FinTech fervor has spread to Denmark as well. Over the last five years, roughly 50 FinTech startups were established in Denmark according to data from Experian and Oxford Research. The spaces in which these startups entered was diverse, ranging from payment intermediaries (35%) to cryptocurrency services (3%).
Funding has also picked up — since 2014 and until May 2016, we tracked 24 investments with the total publicly disclosed investment amounting to €21.2m, or nearly 5% of total FinTech funding in the Nordics in the same time period. 2015 overall was a great year for Danish FinTech, with roughly 12 deals at a total value of €12.2m compared to 8 deals at at total value of €5.9m in 2014.
So far, 2016 is off to a very good start with 5 investments taking place at a total value of €3m just in the first 5 months. 2016 even saw FinTech startup Clearhaus invest a multimillion kroner sum into two other FinTech startups, one of them being the Danish payment service Paylike.
Turning to who received funding, almost all of it — nearly 90% — went to just 5 companies:
The newness of FinTech has definitely been reflected in the stages of investment with 75% of deals classified as a Series-A or earlier, with the average investment being €1.2m (although this skewed by rather large investments in the top 10% of companies). Looking at the bottom 90%, the average investment was around €360k.
The number of investments has also been generally diverse across the different spaces — although the majority of investment in terms of value has been concentrated in payment and transfer intermediaries (62%), other notable spaces include financial data, trading, and advisory services (10%) and point-of-sales services (9%).
Perhaps most interestingly, in terms of value, Danish FinTech has been led by international investors — with Singapore’s Scentan Ventures investing €5.5m, Sweden’s Zenith Ventures investing €2m, and Hong Kong’s Nova Founders Capital investing €2.1m. Taken together, international venture funds have provided nearly half of the funding to Danish FinTech companies in the last two years. Danish venture capital and growth funds including SEED Capital and Innovationsfonden, meanwhile, together have closed 5 deals and invested (publicly) nearly €2m in Danish FinTech startups.
Nordic FinTech has seen incredible development in the last two years. The amount of interest and investment is increasing significantly and can help to put the Nordics on the map as a FinTech hub. In Denmark, entrepreneurs, consumers, and investors are becoming more interested in FinTech — and there is growing momentum to see the space develop even further. However, with Sweden handily beating Denmark in funding and development of FinTech companies there is still much work to be done, primarily within regulation and encouraging further investment, if Copenhagen wants to be a FinTech capital.
The next year will be incredibly important in setting the stage for the future of FinTech in Denmark. Private industry groups are pushing harder than ever to loosen regulatory burdens for innovations in the financial sector, new players such as Lunarway are gaining greater momentum and have a strong desire to disrupt traditional retail banking, and established financial players like Nordea (who themselves are no strangers to innovation) are establishing their own venture arms to tap into this new drive to revolutionize traditional financial services. Should these forces prevail, then 2016 may well turn out to be the year where Denmark begins to establish itself a major player and rival to Sweden in European FinTech.
Methodology and endnotes
Company and funding data was gathered from free public sources including Crunchbase, Dealroom, company/investor press releases, and articles from international media and industry reports.
Although much care was used to try to find as much funding data as possible, there is a great deal of undisclosed investments and/or missing data. No estimations were used — only confirmed and publicly disclosed funding amounts were included in the totals.
Companies that were included in the analysis follow the criteria outlined in an earlier post about what counts as a Danish company in an international context.
The definition of a “FinTech” company follows that of previous analyses on the topic — mainly that the company’s primary operating space or function is within facilitating financial transactions through the use of innovative or new technologies (processes or actual). This could be for example, financing or loans (including crowdfunding), banking, investment data or brokering, payment intermediaries, or providing others’ financial products. We generally avoided including general accountancy or “mid/back-office” services.