Fintech startups in India raised $1.2 billion in Q1 2023, marking a significant increase from the previous quarter. However, this figure was 55 per cent lower than the funds raised in Q1 2022, indicating a slowdown in the industry’s growth. The number of funding rounds also declined by 77 per cent and 39 per cent compared to Q4 2022 and Q1 2022, respectively, according to Traxcn.
Funding rounds
Late-stage funding for fintech startups recorded a spike of 325 per cent in Q1 2023, reaching $977 million. However, this figure still fell 44 per cent short of Q1 2022. On the other hand, early-stage funding and seed-stage funding decreased by 30 per cent and 21 per cent, respectively, compared to the previous quarter. Compared to Q1 2022, early-stage and seed-stage funding fell by 76 per cent and 74 per cent, respectively.
The fintech sector observed six $100-million funding rounds in Q1 2023. Companies such as PhonePe, Mintify, Insurance Dekho and KreditBee raised funds above $100 million during this period.
Investors
Sequoia Capital, AngelList, and Y Combinator were the most active investors in India‘s fintech space, while Y Combinator, LetsVenture, and Premji Invest were the top investors in Q1 2023. Y Combinator, 100X.VC, and LetsVenture were the top seed-stage investors. Xceedance, Telama Family Office, and CourtsideVC were the top early-stage investors, while Premji Invest, General Atlantic, and TVS Capital Funds were the top late-stage investors.
IPOs and unicorns
No companies from the fintech space went public in Q1 2023, and there were no new entrants to the unicorn club. This indicates a lack of investor interest in taking Indian fintech companies public, perhaps due to the lower valuations of Indian companies compared to their global counterparts.
While there were no significant IPOs or new unicorns, the fintech sector did witness a slight uptick in acquisitions, with 11 acquisitions in Q1 2023, compared to six acquisitions in Q4 of 2022.
Geographical distribution
Fintech companies in Bengaluru led the way in India, raising $796 million in the first quarter of 2023. This was followed by Mumbai and Gurugram, which raised $222 million and $151 million, respectively, during the quarter.
According to numbers released by the Reserve Bank of India (RBI), 128 million retail digital payment transactions worth $600 billion were processed in January 2023 alone. The government has also introduced new regulations, such as restrictions on access to user data, to promote the safety and privacy of users.
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