Fintech startups raise $3.4 billion in 2022 so far: Report

Fintech startups have raised $3.4 billion in funding as of July 2022 with 191 deals recorded, a report by fintech-focused angel platform Connexdoor has said.

According to the report, titled ‘The State of Fintech Funding in India’, funding for fintech startups in the last six months has slowed down. A comparative study between 2021 and 2022 shows that while 2022 has seen a 28% increase in the number of deals so far, the increase in cumulative funding amount, at 2.7%, has been marginal.

Of the total amount raised, 26.7% went to lending technology, 14.6% to corporate technology, 9.95% to payment technology, 6.81% to insurtech, 21.9% to wealth technology, 7.8% to new banks, 8, 3% to emerging technology, 3.1% to financial inclusion, and 0.52% to marketplaces.

Some of the bigger deals include CredAvenue, Pine Labs, Ozyzo which raised over $100M in Q1 2021.

In 2021, 149 fintech deals were recorded in which companies raised $3.34 billion, while 191 deals were recorded in 2022 up to July 22, raising $3.43 billion. Of the total deals, 96 deals (50%) were in the early segment.

Geographically, Bengaluru took the lead in total deals with 84 deals, followed by Delhi NCR with 35 deals and Mumbai with 34 deals respectively.

The decline in fintech funding has been primarily attributed to global macroeconomic conditions.

“One of the important aspects coming out of these trends, it is easy for fintech to build the supply side with respective financial institutions, but difficult to build a sustainable demand side of the business (repeat customer base), in this context, venture investors find it challenging to invest in businesses if there are too many clones without any specific differentiator, moat, or execution capability of the founding team,” said Sagrika Shah, Co-Founder, Connexdoor.

The report said startups saw an influx of abundant capital due to excess capital flowing into riskier asset classes and central banks’ induced liquidity. As central banks began to relax by raising interest rates, money began to flow back into relatively safer asset classes.

Overall debt transactions saw a significant drop from 44 in 2021 to just 14 by July 2022, primarily due to tight funding and uncertainty about the outlook. VCs were seen as making a safe bet as the majority of funds deployed were in proven models of lending and payment technology companies.

Interestingly, investors are choosing to co-invest as they saw a 33.3% increase year-over-year in 2022. Last year saw 14 co-investors in the $4 million Pre-Series A round. Two-investor deals saw a 64% increase, and early-stage co-investment activity soared 150%, with four to six investors participating in a single deal.