Fintech funding to reach $1.2 billion in Q1 2023, shows early signs of improvement
India’s fintech space, considered to be the second largest funded ecosystem after the US, witnessed an increase in funding from the previous quarters. Fintech startups in the country attracted investments worth $1.2 billion in Q1 2023, a sharp jump of 126% compared to $523 million raised in Q4 2022, according to a report prepared by market intelligence platform Tracxn.
However, total funds raised were 55% lower than the $2.6 billion raised in Q1 2022. The number of funding rounds in Q1 2023 also saw a drop of 77% and 39% versus Q4 2022 and Q1 2022, respectively.
Tracxn further said the sector recorded late-stage investments of $977 million in the first three months of 2023, up 325% compared to Q4 2022, but down 44% from Q1 2022.
Early funding for fintech startups during the quarter was $177 million, down 30% and 76% from Q4 2022 and Q1 2022, respectively. Seed-stage funding of $30.2 million was observed during this quarter, a drop of 21 % and 74% from Q4 2022 and Q1 2022 respectively.
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Sequoia Capital, AngelList and Y Combinator were the most active investors in India’s fintech space. Y Combinator, LetsVenture and Premji Invest were the top investors in Q1 2023. Y Combinator, 100X.VC and LetsVenture were the top seed investors. 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.
The fintech sector observed six funding rounds of $100 million in the first three months of 2023. Companies such as PhonePe, Mintify, Insurance Dekho and KreditBee raised funds above $100 million during this period.
It was an uneventful quarter in terms of IPOs and unicorns. No companies from the fintech area were listed on the stock exchange in Q1 2023, and there were no new entrants to the unicorn club. However, there was a slight increase in acquisitions. The sector witnessed 11 acquisitions in Q1 2023, compared to six acquisitions in Q4 2022.
Among Indian cities, fintech companies in Bengaluru took the lead, raising $796 million in the first quarter of 2023. It was followed by Mumbai and Gurugram, which raised $222 million and $151 million respectively during the quarter.
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“Furthermore, the government’s push to promote a cashless economy coupled with increasing internet penetration in both rural and urban areas has contributed significantly to developing this sector in the country,” Tracxn said in its report.
India continues to be an attractive market for fintech investors for several reasons. Digital payment solutions have gained wide acceptance in the country. According to figures released by the Reserve Bank of India (RBI), 128 million digital payment transactions worth $600 billion were processed in January 2023 alone. New regulations that have been introduced in the country, such as restrictions on access to user data, will help promote the security and privacy of users.
