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Battle of the FinTech Cities: Who Comes Out Top?
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Introduction
x2012%FinTech accounts for 12% of global venture capital
investment
London, New York and San Francisco alone make up 38% of global FinTech
VC investment by volume
FinTech VC Investment has grown over 20 times in 10 years
London, New York and San Francisco are the clear epicentres of the FinTech world, with these three cities alone making up 38% of global FinTech VC investment by volume. For the first nine months of the year, London came out top by the number of FinTech VC deals at 194, followed by New York at 164 and then San Francisco at 123. By deal volume, San Francisco was number
one at £3.1bn, followed by London at £2.1bn and New York saw £1.7bn of investment.
However, FinTech activity is by no means limited to these three hubs. This year, there has also been high FinTech VC activity in Paris, Berlin, Stockholm, Atlanta, Boston, Palo Alto, Sao Paulo, Beijing, Singapore and Toronto. Businesses are becoming
more global and FinTech companies are no exception. Technology is main driver of this globalisation. It has levelled the playing field for global trade, enabled effortless communication between workers around the world and facilitated the hiring of employees that companies may well never meet in person.
One of the key attractions of flexible offices for FinTech companies that are growing quickly is the flexible contract nature, which enables them to take more or less space as they need. As a result, a significant portion of the FinTech companies that received VC funding this year are based in this type of workspace. So what do flexible office desk prices look like in the major FinTech cities? The average monthly cost for a private office desk within a flexible workspace is £700+ in San Francisco, Stockholm, Toronto, Boston, New York and London. The distinct anomaly within the FinTech cities is Beijing, which despite ranking 6th by FinTech deal count and 8th by deal volume, has an average monthly private office desk cost of only £225. However, both living costs and average wages are significantly lower in Beijing compared to the other FinTech cities, with the exception of Sao Paolo.
Average monthly cost for a private office desk in a flexible office
Top 10 cities by FinTech VC deal count Top 10 cities by FinTech VC deal volume
Source: PitchBook and Workthere Source: PitchBook and Workthere,
City Deal volume (£bn)
% of global deal volume
1 San Francisco 3.1 17%
2 London 2.1 12%
3 New York 1.7 10%
4 Berlin 0.7 4%
5 Stockholm 0.5 3%
6 Sao Paulo 0.5 3%
7 Atlanta 0.5 3%
8 Beijing 0.4 2%
9 Palo Alto 0.4 2%
10 Boston 0.4 2%
City Deal count
% of global deal count
1 London 194 11%
2 New York 164 9%
3 San Francisco 123 7%
4 Singapore 41 2%
5 Paris 38 2%
6 Beijing 34 2%
7 Toronto 28 2%
8 Berlin 26 1%
9 Stockholm 24 1%
10 Boston 23 1%
Source: Workthere
Flexible office desk prices in the major FinTech cities
FinTech is one of the hottest sub-sectors of the moment. Global venture capital (VC) investment into FinTech reached £17.9bn in the first nine months of this year, now constituting 12% of all global venture capital investment, compared to just 2% in 2010. Having grown over 20x during that time period, FinTech is expanding quickly.
£815£775 £750 £750 £745
£700£620 £595 £560 £555 £530
£320£225
The average FinTech deal size for San Francisco this year is £25m, over double the £11m and £10m in London and New York, respectively. Half of all FinTech VC deals in San Francisco were over £5m, a much higher percentage compared to the 30% equivalent in London. So why do the biggest deals happen in San Francisco?
Analysis of FinTech companies that have received funding in the first nine months of 2019 shows that the firms based in San Francisco have not necessarily been around for longer. The average FinTech company headquartered in San Francisco is just over four years old, similar to those in London and New York. However, the FinTech companies based there are much bigger, with the average number of employees at 316, compared to 44 for New York and 104 for London. Plus, the deals that were done in San Francisco were for companies who had raised much more capital over their lifespan.
London vs San Francisco vs New York
London, San Francisco and New York all saw fewer but bigger deals in the first nine months of the year compared to the same period last year. Deal count fell in each of the cities, whilst deal volume increased significantly. London FinTech VC deal volume increased 137% YoY, supported by some particularly large deals such as OakNorth (£339m), Checkout.com (£177m) and Iwoca (£150m). In San Francisco, deals such as SoFi (£388m), Fundbox (£264m) and Clearbanc (£241m) contributed to a 51% boost, whilst New York saw a 41% increase, supported by funding for Lemonade (£228m), EasyKnock (£164m) and Better Mortgage (£131m).
Since 2010, the number of FinTech VC deals in New York, London and San Francisco grew at a fairly even rate for each city until 2016, at which point London began outpacing San Francisco and New York, and has remained number one ever since. New York now tends to see slightly more FinTech VC deals than San Francisco. However, if you look at capital invested, a different story emerges. San Francisco comes out top by a mile.
FinTech VC deals by count FinTech VC deals by capital invested (£bn)
Source: PitchBook and Workthere
YoY change in FinTech VC deal volume and count
Source: PitchBook and Workthere
Source: PitchBook and Workthere
0.0
0.5
1.0
1.5
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2010 2011 2012 2013 2014 2015 2016 2017 2018
San Francisco London New York
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2010 2011 2012 2013 2014 2015 2016 2017 2018
San Francisco London New York
Source: PitchBook and Workthere
London San Francisco New York
Average age (years) 4.8 4.4 4.3
Average number of employees 104 316 44
Average total capital raised (£m) 22 103 33
£25m137%London FinTech VC deal
volume increased 137% YoYLondon, New York and San Francisco all saw fewer, but bigger deals in teh
first 9 months of the year
The average FinTech VC deal size in Francisco this year
Number of 2019 FinTech VC deals by size
Source: PitchBook and Workthere
-50% 0% 50% 100% 150%
London
San Francisco
New York
Change in deal count Change in deal volume
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London New York San Francisco
Below £0.5m £0.5m to £5mAbove £5m Average deal size (£m)
How has FinTech shaped the office market?London, home to WorldPay, Finastra and TransferWise, has the most FinTech headquarters of any city in the world at over 1,000. New York has 939 and there are 593 in San Francisco. Other cities that house a significant number of FinTech companies are Singapore, Paris, Beijing, Toronto, Chicago, Mumbai and Sydney.
London, home to WorldPay, Finastra and TransferWise, has the most FinTech headquarters of any city in the world at over 1,000. New York has 939 and there are 593 in San Francisco. Other cities that house a significant number of FinTech companies are Singapore, Paris, Beijing, Toronto, Chicago, Mumbai and Sydney.
The tech sector as a whole has been a significant driver of conventional office take-up globally for a long time. However, FinTech specifically is a relatively young sub-sector consisting of a high portion of startups. As these early-stage companies grow headcount and become more established over the coming years, we expect to see more moving from flexible to conventional offices and therefore supporting conventional office demand, particularly in London, New York and San Francisco. We also expect FinTech companies to fill many senior positions with talent from finance rather than tech, as knowledge of finance in general and specifics about competitors will be hugely beneficial to some of these growing FinTech companies.
Top cities for FinTech headquarters
Source: PitchBook and Workthere
So how does this impact the office landscape? A significant portion are based in flexible offices. Overlaying flexible office take up with FinTech venture capital investment shows a clear relationship between the two for London, albeit less so for New York and San Francisco. This makes sense, given that in London, FinTech has accounted for 30% of all VC investment over the past five years, compared to 14% for both San Francisco and New York. Therefore, in London FinTech will be a greater driving force of overall flexible office demand.
FinTech as a % of overall VC investment over the past five years
Source: PitchBook and Workthere
City Count of FinTechHQs
1 London, United Kingdom 1,0332 New York, NY, USA 9393 San Francisco, CA, USA 5934 Singapore, Singapore 2525 Paris, France 2306 Beijing, China 2227 Toronto, Canada 2228 Chicago, IL 1979 Mumbai, India 14910 Sydney, Australia 140
London is home to over 1,000 FinTech headquarters
0% 20% 40% 60% 80% 100%
London
San Francisco
New York
FinTech Non-FinTech VC investment
Cal LeeHead of Workthere +44 (0) 20 7409 [email protected]
Get in touch for further information
Jess AldersonGlobal Research+44 (0) 207 409 4561 [email protected]
Workthere.com | Savills.comWorkthere is a business by Savills focused solely on helping businesses find flexible office space, whether that’s a serviced office, co-working or shared space.
Matthew FitzgeraldCross Border Tenant Advisory - EMEA+44 (0) 207 299 [email protected]
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