End Of Funding Winter For Fintechs?
Late-stage funding witnessed a rise in funding this quarter, an increase of 392 per cent with USD 394 million raised in Q1 2024 compared to USD 80.1 million raised in Q4 2023.
The Indian fintech startup ecosystem witnessed growth in Q1 (January to March) 2024 compared to the previous quarter in 2023. However, there is a notable decline compared to the previous year's numbers. According to Tracxn, India ranks third globally in terms of funding raised in Q1 2024 for Fintech sector. Indian economy showed a strong performance in the previous quarter with a growth of 8.4 per cent.
This number is expected to decline to 5.9 per cent in Q1 2024 as per government sources. Since the announcement of the Startup India Initiative in 2016, multiple schemes and initiatives have been introduced to boost the growth of India’s startup ecosystem.
Around USD 12 billion was allocated in the Interim Budget for 2024 for providing interest-free loans for 50 years to promote R&D in the private sector in the country which can potentially give a significant boost to the Indian fintech ecosystem.
UPI: The Fintech Enabler
UPI (Unified Payments Interface) is expected to continue to drive growth for the fintech sector. It has consistently been one of the top funded sectors in the country. Increasing smartphone penetration, the push towards a cashless economy and other favorable regulatory policies have helped the sector receive consistent investor interest.
Q1 2024 has witnessed a total of USD 551 million in funding to date, a growth of 59 per cent as compared to USD 346 million raised in Q4 2023 and a drop of 57 per cent compared to the USD 1.3 billion funding raised in the Q1 2023.
Seed-stage funding in Q1 2024 has dropped to USD 9.9 million from USD 39.2 million raised in the previous quarter. This is a 75 per cent drop from Q4 2023 and a 77 per cent drop compared to funding raised in Q1 2023. Early-stage rounds witnessed funding of USD 147 million in Q1 2024, a 35 per cent drop from USD 227 million raised in Q4 2023 and a 42 per cent drop compared to the funding raised in Q1 2023.
Late-stage Funding Status
Late-stage funding witnessed a rise in funding this quarter, an increase of 392 per cent with USD 394 million raised in Q1 2024 compared to USD 80.1 million raised in Q4 2023. This accounts for a 60 per cent drop compared to USD 986 million raised in Q1 2023.
During Q1 2024, the Indian fintech sector saw only two funding rounds exceeding the USD 100 million threshold, mirroring the figures from Q4 2023. In contrast, Q1 2023 recorded four funding rounds surpassing the USD 100 million mark.
Credit Saison and Avanse raised funds of over USD 100 million in Q1 2024. The Alternative Lending space has received a total of USD 491 million in funding in Q1 2024 which is a significant 290 per cent increase compared to USD 126 million raised in Q4 2023 and also accounts for an increase of 39 per cent compared to USD 353 million raised in the same period Q1 2023. The funding in this space accounts for almost 89 per cent of the total funding witnessed in the fintech India space for this quarter.
Credit Saison is the top-funded company in the sector in Q1 2024 receiving USD 144 million in a Series D round. Avanse, Perfios and Vivifi India Finance are some of the other top-funded companies. Reg-tech is the second-highest funded sector in Q1 2024 receiving USD 107 million in funding. No funding was observed in this space in the previous quarter.
Perfios, a provider of credit decisioning platforms has raised USD 80 million, making it Unicorn in March 2024. Banking-tech is the third-highest funded space in Q1 2024 for fintech India, receiving USD 85.8 million in funding, a 187 per cent increase compared to the USD 29.9 million in funding witnessed in Q4 2023.
Breaking IPO Winter
Perfios was the only unicorn to emerge from the Indian Fintech startup ecosystem in Q1 2024. The quarter witnessed only two IPOs. However, Q4 2023 and Q1 2023 witnessed no IPOs.
Medi Assist and IBL Finance are two Indian fintech companies that went public in January 2024. The sector saw four acquisitions in Q1 2024, as compared to seven acquisitions in Q4 2023, a 43 per cent drop. This is also a 64 per cent drop compared to 11 acquisitions in Q1 2023.
Difenz, a fraud risk management platform, was acquired by Signzy for a price of USD 5 million. Bengaluru, Mumbai and Hyderabad are the top-funded cities in India in Q1 2024.
Who Is Backing Fintechs?
Peak XV Partners, Y Combinator and LetsVenture are the top investors in the fintech space. Saison Capital, Hem Angels and Capital A are the lead investors in the Seed Stage in Q1 2024. Peak XV Partners, RTP Global, and Asha are the most active investors in the early stage in Q1 2024.
Elev8, Epiq Capital Advisors and UC-RNT Fund are the leading investors actively involved in late-stage in Q1 2024.
