In Q1 2024, enterprise capital (VC) funding for fintech firms in India declined considerably, falling by a staggering 57.6% year-over-year (YoY), a brand new report by personal market information platform Tracxn reveals.
In the course of the quarter, Indian fintech firms secured solely US$550.8 million in VC funding, a far cry from the US$1.3 billion raised by the sector throughout the identical interval a 12 months prior. Deal counts additionally declined, lowering from 56 rounds in Q1 2023 to 33 in Q1 2024.
Quarterly fintech VC funding in India, Supply: Fintech – India Quarterly Funding Report Q1 2024, Tracxn, Apr 2024
The info, offered in Tracxn’s “Fintech – India Quarterly Funding Report”, reveals that fintech funding continued its downward trajectory in 2023, carrying on a pattern that began the previous 12 months.
In 2023, Indian fintech firms secured about US$2 billion in VC funding via 143 rounds, down from US$5.4 billion (-63% YoY) and 503 offers (-71.6% YoY) in 2022, information from Tracxn reveal. In 2021, the sector reached its peak, attracting a document of US$8.4 billion via 611 rounds.
Annual fintech VC funding in India, Supply: Geo Annual Report – Fintech, Tracxn, Jan 2024
Fintech funding began to recede in 2022 as buyers turned extra cautious amid hovering rates of interest, a looming world recession and geopolitic tensions.
In 2022, world fintech VC investments fell 44% YoY from their all-time excessive of US$140.8 billion in 2021. That pattern continued in 2023, declining by 50% to US$39.2 billion and reaching its lowest stage since 2017, information from market intelligence and enterprise analytics platform CB Insights present.
Annual fintech fairness funding and offers, Supply: State of Fintech 2023, CB Insights, Jan 2024
In India, one contributing issue to the decline of fintech VC funding in 2023 was the lower within the variety of mega-rounds price US$100 million and up. Final 12 months, solely 5 mega-rounds have been closed within the sector, in line with the report: a US$623 million Collection D secured by digital cost firm PhonePe; a US$229 million Collection D closed by business-to-business (B2B) software-as-a-service (SaaS) supplier Perfios; a US$150 million Collection A raised by insurtech startup InsuranceDekho; a US$120 million Collection D secured by digital lending specialist KreditBee; and a US$110 million Collection D raised by on-line provide chain financing platform Mintifi.
Throughout Q1 2024, buyers favored later-stage investments, which accounted for 71.5% (US$394 million) of all fintech investments and represented 18% (6 rounds) of all offers. This represents a major improve from the prior quarter the place late stage rounds represented simply 23% of fintech VC funding and 9% of deal counts.
Quarterly fintech funding traits in India, Supply: Fintech – India Quarterly Funding Report Q1 2024, Tracxn, Apr 2024
Taking a look at sectoral traits, the information present that different lending was the highest fintech section in Q1 2024, securing a complete of US$491 million throughout the quarter. The class is adopted by regtech, with US$107 million, banking tech with US$85.5 million, and funds with US$21.1 million.
Y Combinator was probably the most energetic accelerator/incubator within the Indian fintech sector in Q1 2024, whereas Peak XV Companions led as probably the most energetic early-stage investor. Lastly, Elev8, UC-RNT Fund, and Epiq Capital Advisors have been the highest buyers in late-stage fintech funding throughout the interval.
India’s fintech sector
India has one of many largest and most dynamic fintech industries on this planet. In accordance to the Boston Consulting Group (BCG), the nation ranks because the third-largest and one of many fastest-growing fintech markets worldwide when it comes to funding, deal volumes, and fintech energy.
Between 2020 and 2023, India witnessed exceptional progress in its fintech sector, attaining a compound annual progress price (CAGR) of 14%, the very best globally. As of July 2023, the nation boasted 10,244 fintech firms, behind solely the US (34,034) and the UK (12,775).
When it comes to fintech funding, India ranks third globally, accumulating a complete of US$25 billion throughout 2,236 offers between 2018 and 2023.
Prime fintech markets in world, Supply: State of the Fintech Union 2023, Boston Consulting Group, Sep 2023
Indian fintech firms generated an estimated US$17 billion in income in 2022. By 2030, that sum is anticipated to succeed in a staggering US$190 billion, rising at a CAGR of 35.2%.
India Fintech Income 2030 Projection, Supply: State of the Fintech Union 2023, Boston Consulting Group, Sep 2023
Regardless of these spectacular metrics, the worldwide VC funding contraction and financial uncertainties in 2023 led to a lower within the variety of fintech startups included in India.
Information launched by mergers and acquisitions deal-sourcing platform Growthpal present that the variety of fintech startups which acquired included in India in 2023 decreased by 72.6% in comparison with 2021 and by 55.55% from the figures of 2022. Solely 20 fintech startups have been included final 12 months, in comparison with 73 and 45 in 2021 and 2022, respectively.
To help the fintech sector and the broader startup ecosystem, the Union Minister for Finance and Company Affairs, Nirmala Sitharaman, proposed to create a corpus of INR 1 trillion (US$12 billion) throughout the Interim Finances 2024-25 in Parliament final month. This corpus goals to spice up personal funding in applied sciences and usher in “a golden period for our tech-savvy youth,” the minister stated.
The corpus will likely be established with a 50 12 months curiosity free mortgage, and can present long-term financing or refinancing with lengthy tenors and low or nil rates of interest.
Featured picture credit score: Edited from Freepik
