Looking Back at 2022

The Venture Capital Market saw a global downturn in 2022. Deal-counts took a nosedive in Europe from 3000 recorded deals in Q1-22 to just over 1600 recorded deals in Q4-2022 (Graph 1). Similar trends were seen in European Venture Dollar Volumes (Graph 2). There were numerous reasons driving these repercussions in private markets, including but not limited to – higher interest rates, inflation risks, policy concerns, public market sentiments and geopolitical factors.

We at Fasanara have always fostered a culture of profitable and sustainable growth amongst our VC Portfolio Companies – paying a strong attention to their unit economics and a clear path to profitability. In 2022, the focus of the broader market also shifted from “growth at all costs” to sustainable and revenue-efficient growth, further strengthening our conviction on our approach. Markets have now started demanding a clear path to profitability even from early-stage startups – something which was surprisingly rare until last year. There is an increased focus amongst start-ups on enhancing the cash-runway today and reaching break-even without further external capital injection.

Amidst the global downturn, the FinTech sector continues to be at the forefront of innovation in Europe. FinTech was the most-funded sector in Europe in 2022, followed by energy, transportation, and health (Graph 3). With unicorns emerging in Europe such as Scalapay, Wayflyer, Satispay and Qonto, private markets have shown a strong level of confidence in the strength and resilience of the European FinTech space despite the broader downturn.

In 2022, 47 unicorns were minted in Europe (Graph 4), out of which, 14 were FinTech unicorns. Fasanara has been a proud early-stage partner of two of these unicorns – Grover and Scalapay.

But as with every-sector, the picture is not all rosy. Fintech is also facing some strong headwinds. Cost of funding has increased markedly, putting strong downward pressure on the unit economics of companies relying only on interest spread as their source of revenue. The challenge will be to investigate and activate new sources of revenues that can help mitigate the impact of such external factors to some extent.

The early-stage venture capital space has had a bumpy ride in 2022 and we saw numerous down-rounds, lay-offs and closing of shops across the table. Fasanara’s belief, however, in a tech-centric financial future for the world remains unchanged. As always, we consistently strive to create a future-facing ecosystem for our portfolio companies to thrive and succeed in a sustainable and healthy manner. Our deep-rooted expertise in our focus-sectors and the eco-system support helps our portfolio companies effectively withstand economic cycles and come through into bull-markets with stronger and more resilient businesses. The fundamentals of the market remain intact and the opportunity today for Global FinTech and Web3.0 leadership is bigger than ever!