Funding across India’s fintech space almost halved in 2022 due to decline in late-stage funding activity throughout the year. However, it remained as one of the top funded sectors, according to a new report.
“Fintech startups in India raised a total of $5.65 billion in 390 rounds in 2022, a plunge of 47% in terms of funding amount and 29% in the number of rounds, when compared with 2021,” the report by market intelligence platform Tracxn said.
Fintech startups’ funding lagged behind the enterprise software and enterprise applications sectors. According to a data available, as of November 30, enterprise applications sector, which includes startups in enterprise software, software-as-a-service (SaaS), and HR tech platforms, raised $7.2 billion across 644 deals in 2022.
In terms of volume, funding rounds of over $100 million+ also halved in 2022, from about 26 in the previous year. Thus, with the fall in large fundraises, only four fintech players could touch a billion dollars in valuation, against about 13 new unicorns which emerged in the space in 2021.
Interestingly, last year also saw fewer unicorns as against 2021 amid a funding winter caused by inflationary pressures and macroeconomic headwinds as only 23 startups, across sectors, could touch the valuation against the 44 that could become unicorn in 2021.
The most active investors in the space 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 a smooth sail for fintech’s growth in the long run, particularly seeing the increasing adoption of fintech solutions due to higher digitization since the COVID-19 pandemic, and an expansion in digital payments and lending services in Tier II cities and beyond.
“A large unbanked population and rising mobile phone usage are some of the factors that will aid the sector’s growth in the long run,” the report noted.
According to Blume Ventures, one of the top-10 active VCs in India in 2022, fintech, along with SaaS, cleantech, and consumer tech, will continue to remain central to investors going forward as well.
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 latest decacorn as well as the most valuable homegrown fintech startup.
