Fintech start-ups signed more deals but saw only a small increase in funding

Funding in the fintech startup arena has slowed over the past six months after peaking in January 2022 with 35 deals. Furthermore, a comparative study between 2021 and 2022 showed that although several agreements have taken place so far in 2022 – up 28 percent from last year – only a marginal increase in the amount of funding of around 2.7 percent was seen.

According to a recent analysis by Connexdoor, a fintech-focused investment platform, a total of 191 deals occurred in 2022 through July, raising $3.4 billion, while all of 2021 saw 149 fintech deals with a total fundraising of 3 .3 billion dollars.

In the current calendar year, 93 agreements were in the Business To Consumer (B2C) category, followed by 76 in the Business To Business (B2B) and 21 in the B2B2C area. Furthermore, 96 agreements were in the early segment.

In terms of the geographical spread, Bengaluru emerged as the leading fintech hub with 84 deals, followed by NCR with 35 and Mumbai with 34 deals.

The study attributed the tapering to current global macroeconomic conditions that have led central banks to raise interest rates, which in turn caused money to flow into relatively safer assets and start-ups feeling squeezed.

“Month-on-month deals have been consistently declining since January 2022. Apart from June 2022, the number of fintech deals in India has been declining,” said Sagrika Shah, Co-Founder, Connexdoor.

“The month of July had almost half the offers compared to January. While the amount of inflow remains stagnant on an annual basis, we are seeing a clear decline in traction, which we expect to worsen,” Shah added.

According to the study, over 40 percent of the total amount was deployed in the lending space, while WealthTech and EmergingTech saw growth of over 100 percent in terms of deals and funding amounts. Furthermore, over 60 percent of the assets and new technology deals were in the early stages.

This was primarily on the back of increased traction in segments such as BNPL – Buy Now, Pay Later – and new banking, according to the Connexdoor study.

Meanwhile, 564 PE/VC firms participated in funding rounds in 2022, up from last year’s 375. However, while VC participation increased in the current calendar year, there was only a marginal increase in funding amount. Debt transactions fell significantly to 14 in the current calendar year to July from 44 in 2021.

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