Indian Fintech Startups See $2 Billion Funding Slide in 2023
India”s fintech startups have seen the lowest funding in three years in 2023, raising a total of $2 billion, with just five of them being funded more than $100 million each and only one fintech reaching a unicorn ($1 billion) valuation, according to a report by Tracxn.
At $2 billion, the total fund raised in 2023 is a 63% fall compared to the previous year and a 76% decline compared to 2021, with late-stage rounds witnessing a 56% drop in fund inflows, while early-stage and seed-stage rounds saw a 73% and 69% drop, respectively, adding only five rounds surpassing the $100 million mark.
Peak XV Partners, Y Combinator, and LetsVenture were the top investors in the space.
The five startups that received $100 million in funding are Perfios, Mintifi, InsuranceDekho, PhonePe, and KreditBee. InCred remained the only fintech to reach a unicorn ($1 billion) valuation after raising $60 million from investors, while just two companies, Zaggle and Veefin, announced IPOs in comparison to the five companies that went public in 2022.
Alternative lending, payments, and banking tech were the top-performing segments, with fund inflows of $835 million( a 63% drop from a year earlier), $753 million( a 41% slump from the previous year), and $331 million (a 50% drop from a year earlier), respectively. However, BNPL (buy now, pay later) saw significant growth due to its rampant adoption in the country.
“The Digital Personal Data Protection Act was recently implemented by the Government of India, which will ensure more transparency and customer trust in the sector. This can potentially benefit the digital lending space, which is increasingly relying on customer data for its product marketing and development,” the report said.
The report attributed the funding winter to dented investor sentiment on the back of high interest rates and macroeconomic headwinds.
The funding crunch seen in the fintech scenario led to a broader startup cash crunch, according to the report. However, the report is optimistic about future funding, aided by a larger customer base and government-driven initiatives.
“The implementation of regulatory measures and the government’s commitment to digitalization have set the stage for a promising future,” Tracxn’s co-founder, Neha Singh, said.
