“Fintech Remains Among Top Funded Sectors Despite Investment Drop”

Funding across India’s fintech space nearly halved in 2022 due to a slowdown in late-stage funding activity throughout the year. However, it remained one of the best-funded sectors, according to a new report.

“Fintech startups in India raised a total of $5.65 billion in 390 rounds in 2022, a drop of 47% in terms of funding amount and 29% in number of rounds, compared to 2021,” said the report by market intelligence platform Tracxn.

Funding for Fintech startups lagged behind the enterprise software and business applications sector. According to available data, as of November 30, the enterprise applications sector, which includes startups in enterprise software, software-as-a-service (SaaS) and HR technology platforms, collected $7.2 billion across 644 deals in 2022.

In terms of volume, funding rounds over $100 million were also cut in half in 2022, from about 26 the year before. Thus, with the drop in large fundraisings, only four fintech players could reach a billion dollars in valuation, against about 13 new unicorns that appeared in the space in 2021.

Interestingly, there were also fewer unicorns last year compared to 2021, amid a funding winter caused by inflationary pressures and macroeconomic headwinds, when only 23 start-ups, across sectors, could impact valuations against the 44 who could become unicorns in 2021.

The most active investors in the area were Y Combinator, Tiger Global Management and Lets Venture, as they made over 20 investments in fintechs last year.

However, the market data platform expects smooth sailing for fintech’s growth in the long term, especially considering the increasing use of fintech solutions due to higher digitization since the COVID-19 pandemic, and an expansion of digital payment and lending services in Tier II cities and beyond.

“A large unbanked population and increasing mobile usage are some of the factors that will help the sector’s growth in the long term,” the report noted.

According to Blume Ventures, one of the 10 active VCs in India in 2022, fintech, along with SaaS, cleantech and consumer technology, will continue to remain central to investors going forward.

Among one of the most watched deals in the space in 2023, Walmart-backed PhonePe, which recently completed its separation from e-commerce giant Flipkart, raised $350 million from US private equity firm General Atlantic at a pre-money valuation of $12 billion. , becoming the last decacorn as well as the most valuable homegrown fintech startup.