233 German FinTech startups failed
In a first-of-its-kind study, the German practice of global consulting firm PricewaterhouseCoopers (PwC) has analyzed the failure of FinTech startups in its recently published “PwC FinTech Kooperationsradar”.
The study has looked at FinTech startup failures since 2011. The average age of the startups when ceasing their business was 3.8 years (with 81% of the discontinuations taking place during the first five years), so the significant increase since 2017 has an obvious correlation to the founding boom that kicked into high gear around 2015 — for 2019, PwC projects 82 bankruptcies.
A similar rationale applies to the geographic distribution: Berlin as Germany’s startup hub has seen the most companies giving up, with 74, followed by Munich and Hamburg, with 25 and 21, respectively. B2C and B2B startups fail almost equally over the entire timeframe, with 48% and 44% of the population, respectively. However, looking at the first five months of 2019 alone, 28 B2C startups have failed vs only 11 B2B companies.
In terms of the business segments, Alternative Finance leads with 70 startups, followed by PropTech with 53 and Payments with 29. It is also noteworthy that Venture Capital-supported startups make up only 11% of the failed population. The report does not detail any reasons, although we can assume that in addition to better capitalization, the coaching and connectivity provided by the VCs play an important role.
On the bright side, German neobank N26, founded in 2013, has achieved unicorn status and a valuation of USD 2.7bn with their latest funding round in January 2019. As the startup ecosystem matures, we do expect a few more success stories like that, a few failures along the way not withstanding.
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