The decline in funding was largely due to the downward trend in early-stage investments, which plunged 81 per cent and 68 per cent from H1 2022 and H2 2022, respectively.

Funding in Indian fintech startups in H1 2023: Funding in fintech startups dropped by a massive 67 per cent to $1.4 billion in the first half (H1) of 2023 from $4.3 billion raised in H1 2022, said market intelligence platform Tracxn in its FinTech – India Semi Annual Funding Report – H1 2023. The decline in funding, according to the report, was largely due to the downward trend in early-stage investments, which plunged 81 per cent and 68 per cent from H1 2022 and H2 2022, respectively.

Seed-stage funding in H1 2023 also recorded a dip of 38 per cent and 70 per cent from H2 2022 and H1 2022, respectively. On the other hand, late funding in the first half of 2023 grew 66 per cent from H2 2022 but dropped 62 per cent from the same period last year, the report said on Monday.

However, the funds raised in the first six months of 2023 dipped only 6 per cent from $1.5 billion in H2 2022. The fintech startup ecosystem raised funds worth $1.18 billion in Q1 2023, contributing to more than 84 per cent of the funds raised in the first half of 2023. The funds raised in the first three months of this year were also 2X higher than the funds raised in the previous quarter (Q4 2022). Meanwhile, Q2 2023 was the least funded quarter since 2021, according to the report.

Among segments, payment, alternative lending and internet-first insurance platforms were the top-performer in the fintech segment in H1 2023. Payment startups accounted for 55 per cent of the total funding received in the fintech sector in the first six months of 2023. This was up by 3X 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.”

The fintech space saw seven over $100 million rounds in the first six months of 2023 while no new unicorns were recorded during this period, compared with four in H1 2022. Moreover, there were no new IPOs in this sector in H1 2023, as against two each in H2 2022 and H1 2022.  However, there was a slight uptick in the number of acquisitions, which rose to 19 in H1 2023 from 13 in the second half of 2022, but still lower than 26 in H1 2022.

Also read: Fintech-led digital lending to surpass traditional lending by 2030: Report

According to the report, Peak XV Partners, AngelList, and Y Combinator were the top investors in the Indian FinTech space. 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.

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 in Bengaluru accounted for 67 per cent of the funds raised in the Indian fintech segment in the first half of 2023.

https://www.financialexpress.com/industry/sme/funding-in-fintech-startups-plunged-67-in-h1-2023-with-decline-in-seed-early-stage-investments/3185071/