Funding Into Fintech Startups In India Plunges 67% In H1 2023: Report The report stated that the funding decline in H1 2023 is largely due to the downward trend in early-stage investments, which plunged 81% and 68% from H1 2022 and H2 2022, respectively
By Teena Jose
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Indian fintech Startups raised a total of $1.4 billion in H1 2023, a massive drop of 67% from $4.3 billion raised in H1 2022. However, the funds raised in the first six months of 2023 dipped only 6% from $1.5 billion in H2 2022, according to a report by global SaaS-based market intelligence platform, Tracxn.
The report revealed that the funding decline in H1 2023 is largely due to the downward trend in early-stage investments, which plunged 81% and 68% from H1 2022 and H2 2022, respectively. Seed-stage funding in H1 2023, too, saw a decrease of 38% and 70% from H2 2022 and H1 2022, respectively. Late-funding in the first half of 2023 grew 66% from H2 2022, but fell 62% from the same period last year.
Eventhough, India has retained its position as the third-highest funded fintech industry in H1 2023, after the US and UK, similar to the previous year. As per the report, India is also the third-largest fintech ecosystem in terms of number of companies next to the US and UK. The number of FinTech companies in India is twice more than China and Canada. FinTech startups in India have received the highest funding compared with any other sector in the country.
Segments In Frame
Payment, Alternative lending and Internet-first Insurance platforms were the top-performing segments in the Indian fintech sector in H1 2023. Payment startups accounted for 55% of the total funding received in the FinTech sector in the first six months of 2023. Funding in the payments segment has increased by 3 times compared with H2 2022. Funding in payment startups is witnessing growth on a global scale, and was the highest performing segment in the US fintech space as well.
Investors and Investments
Peak XV Partners, AngelList, and Y Combinator emerged as the top investors in the space. Among these, IPV, Blume and Titan Capital were the top investors in seed-stage rounds, while Elevar Equity, TPG, and Peak XV Partners were the top investors in early-stage rounds. OP Finnfund Global Impact Fund I and Avataar Ventures were the top investors in late-stage rounds. Also, The Indian FinTech space witnessed seven $100 million-plus rounds in the first six months of 2023. No new unicorns were recorded during this period, compared with four in H1 2022, the report stated.
Cities in Spotlight
Among Indian cities, fintech startups in Bengaluru raised $949 million in H1 2023, 2.5x higher than the next two cities on the list - Mumbai ($218 million) and Jaipur ($150 million). The companies based on Bengaluru accounted for 67% of the funds raised in the Indian FinTech segment in the first half of 2023.
The report further added that, the increased investor interest in fintech startups in this region can be attributed to the higher adoption rate of FinTech solutions in India, compared with the global average. Multiple initiatives by the government, like the introduction of UPI, ease of banking policies, introduction of India's Digital Rupee are accelerating the growth in this segment.
