Fintech Startup Funding Drops by 67% in H1 2023
- ByStartupStory | July 25, 2023
In the first six months of 2023, Indian fintech startups secured a total of USD 1.4 billion in funding, showing a significant contrast to the impressive USD 4.3 billion raised during the same period in the previous year. This trend continues from the funding slump experienced in the latter half of 2022, where the sector received a modest amount of around USD 1.5 billion.
According to the latest industry report from market intelligence platform Tracxn, the Indian fintech sector faced a daunting funding landscape in the first half of 2023, experiencing a remarkable 67% decrease in funding compared to the previous year.
Although the funding downturn, India has managed to retain its position as the third most attractive destination for venture funding, following the United States and the United Kingdom, as highlighted in the report.
PeakXV, AngelList, and Y Combinator emerged as notable fintech investors, playing a significant role in shaping the investment landscape of the Indian fintech sector.
As per the Tracxn report, there was a substantial 81% fall in early-stage investments and a remarkable 70% drop in seed-stage funding during the first half of 2023, compared to the same period in 2022. However, a significant shift was observed in late-stage funding, which took centre stage with an infusion of nearly USD 1.1 billion.
Astoundingly, during the first three months of 2023, fintech managed to raise approximately USD 1.2 billion, accounting for more than 80 per cent of the total funding secured throughout the six months.
Bengaluru took the lead in attracting venture capital, with almost USD 950 million invested in fintech based in the city. Following closely was Mumbai, which received USD 218 million, and Jaipur, securing USD 150 million. Of particular interest, the insurance marketplace, InsuranceDekho, headquartered in Jaipur, raised a significant USD 150 million in February 2023.
The report extensively explored the sectors that managed to secure the most funding. Payments, alternative lending, and digital insurance companies emerged as the top contenders, while the cryptocurrency sector received a relatively modest USD 5.6 million in funding during the first half of 2023.
Aligned with global patterns, 55 per cent of the funding in India’s fintech sector was directed towards payment players. A similar trend was evident in the United States, where payment startups also constituted the primary recipients of venture capital.
PhonePe, a prominent payment app, stood out as a remarkable funding recipient, successfully raising an impressive USD 750 million at a valuation of approximately USD 12 billion. This achievement secured its position among the world’s top ten most valued payment startups.
In the face of funding challenges, seven companies managed to secure funding rounds exceeding USD 100 million, while 19 acquisitions were reported in the first half of the year.
The report highlights the challenging and competitive market conditions that Indian fintech startups navigated through in the first half of 2023, even though no new unicorns were added during this period.
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