Fintech funding fell 55% in March quarter; Y Combinator, LetsVenture top investors: Tracxn

Funding in fintech startups plunged 55% in the January-March quarter of 2023 from the same period last year, signalling that deals in the sector continue to decline.

Investments worth $1.2 billion were made in fintech in Q1 2023—55% lower than the $2.6 billion raised in Q1 2022, according to data by market intelligence firm Tracxn. Late-stage investments dropped to $977 million in the quarter, down 44% from the first three months of 2021.

Early-stage funding deals witnessed a year-on-year drop of more than 76% in the quarter, while seed-stage deals fell 74% compared to 2021. This is contrary to the trend witnessed by other sectors, including healthcare, that saw an uptick in early-stage investments over the last few quarters.

Fintech saw a 126% jump in funding compared to the last quarter of 2022. India was the second highest-funded geography in the world for fintech funding in Q1, and was among the top five geographies in terms of total funding activities.

Acquisitions and public listings also remained muted in the quarter, indicating a fairly uneventful period for the fintech ecosystem.

Y Combinator is among the most active investors in the space—along with Sequoia Capital and AngelList—as well as among the top seed-stage investors and most active investors, along with LetsVenture. While Premji Invest was among the top investors in Q1 2023, 100X.VC was also a top seed-stage investor. Xceedance, Telama Family Office, and CourtsideVC were the top early-stage investors, while Premji Invest, General Atlantic, and TVS Capital Funds were the top late-stage investors.

A total of six $100 million funding rounds took place in the first three months of 2023. Companies such as PhonePe, Mintify, Insurance Dekho, and KreditBee raised funds close to $100 million during this period.

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Among Indian cities, fintech companies in Bengaluru took the lead, raising $796 million in the first quarter of 2023, followed by Mumbai and Gurugram, the report said.

India continues to be an attractive market for fintech investors for several reasons. Digital payment solutions have received widespread acceptance within the country. According to numbers released by the Reserve Bank of India (RBI), 128 million retail digital payment transactions worth $600 billion were processed in January alone. Some new regulations introduced in the country, such as restrictions on access to user data, among others, will help in promoting the safety and privacy of users, the report added.