There was only one fintech unicorn birth in the first quarter

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Global fintech funding totaled $15 billion in the first quarter of this year, up 55% from the fourth quarter, according to CB Insights’ latest State of Fintech report.

While this may generally seem like a win, it’s important to note a few things. First, 2020 and 2021 were unique years where investment in fintech broke records. In comparison, fintech financing constituted 75.2 billion dollars in all of 2022down 46% compared to a staggering $131.5 billion collected in 2021. From the figures for the first quarter, it is clear that the market is working on a correction.

Second, of the $15 billion raised during the first quarter of this year, $6.5 billion of that was Stripe. Without this increase, CB Insights said funding would have totaled $8.5 billion, or a 12% drop in funding from Q4 2022. And third, if we strip out Stripe’s round and stick to $8.5 billion dollars, when we compare this quarter with the first quarter. quarters from previous years, funding is the lowest it has been since 2019.

In the meantime, the number of agreements has also been reduced. 983 agreements were made in the first quarter, a decrease from 1,007 in the fourth quarter of 2022 and 1,629 in the first quarter of 2022.

One bright spot in the market was “megarounds,” which are deals valued at $100 million or more. Those deals accounted for 61% of total funding in the first quarter, a whopping 179% quarter-on-quarter increase over 16 deals and a total of $9.2 billion, CB Insights reported. According to Stripe’s agreement was Rippling, which raised $500 million in mid-March when Silicon Valley Bank melted down. In particular, the number of deals was down, falling 24% quarter on quarter.

Early-stage funding continued to dominate in fintech, but for the first quarter it hit a new high, accounting for 72% of deal share in the three-month period, CB Insights reported. Since 2019, this figure has been in the mid-60% range, rising to 69% in the first quarter of 2022.

Although the US led across all stages during the quarter, it is worth noting that six of the top 10 fintech seed and angel rounds were invested outside the US UK-based Carbonplace, a carbon credit settlement startup, raised the entire 45 million dollars. round during the quarter.

Speaking of the US, the region took in $10.5 billion in total funding for the first quarter, which is three times the funding from the fourth quarter of 2022, which was $3.5 billion, and coincidentally a five-year low. The number of deals also rose from the fourth quarter, up 23% to 434.

CB Insights notes that excluding Stripe’s round (recalling it was $6.5 billion), the US funding was $4 billion and would still have exceeded Q4. Drilling down into the deal stage, the share of early deals in the US rose to 68%, a five-year high, according to CB Insights.

Meanwhile, after a steady decline in funding dollars going into the payments sector, Stripe’s mega round helped turn that into a 200% jump to $8.1 billion in the first quarter compared to $2.7 billion in the fourth quarter of 2022 , that’s down slightly from Q1 2022’s $8.3 billion. Meanwhile, the number of deals continued to decline, falling to 161, down from 195 in the fourth quarter. It marked the ninth straight decline in deal volume, according to CB Insights. The increase in investment dollars was seen most prominently in early-stage deals, which made up 74% of total deals and a five-year high, up from 66% in 2022.

Other highlights of the report include:

• There was only one unicorn birth in the entire quarter. This is the first time this has happened since late 2016. The only unicorn born in Q1’23 was Egypt-based MNT-Halan, as in early February raised $260 million in equity financing at a $1 billion valuation. But overall, according to CB Insights, the total fintech unicorn herd was still at 314 in Q1’23, up 11% year-over-year.
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  Image credit: CB Insights

• Fintech M&A exits bounced back, but not as much as one might have expected. They increased 15% QoQ to 172 deals. Most of Q1’23’s top M&A deals involved fintechs based outside the US. For the first time in the past year, the highest M&A value fell below 500 million dollars.
• Bank funding fell a whopping 64% QoQ to just $500 million in Q1’23, the lowest total since Q2 2017, when bank funding was $300 million. This plunge marked the largest quarterly drop in funding across all fintech categories. Compared to Q2’21’s record high of $8.2 billion, bank funding was down a staggering 94% in the first quarter. The number of deals also fell, falling 16% QoQ and 63% from Q2’21’s record high of 139 deals.
• Total funding for Asia fell 33% quarter-over-quarter to $1.8 billion in the first three months of 2023, the lowest since the fourth quarter of 2017. Deals also fell 18% QoQ to 195. Asia’s share of early phase deal increased by 7 percentage points from 2022’s year-end share to reach 78% in the first quarter, marking a 5-year high. Of Asia’s top 10 equity deals, one went to an early-stage startup, Indian insurtech InsuranceDekho, which raised $150 million in February.
• Canada was the only region to see its late-stage equity share fall to 0%. Canada funding also held steady at $300 million quarter-over-quarter, while deals fell 44%. Nine of Canada’s top deals in the first quarter went to early-stage companies. Crypto and blockchain infrastructure firm Blockstream secured the top deal – a $125 million convertible note.

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