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Indian Fintech Funding Analysis 2021

The Digital Fifth Indian Fintech Funding Analysis 2021

The flow of funds in Fintech startups has always been one of the primary indicators showcasing the health of the segment. At The Digital Fifth, we have created this report to provide an insight into the investment deals made in Fintech in India over the past 5 months ie. from January to May. We have analysed the overall trend of funding across segments and investment rounds. A total of 90 investments, which sum up to a value of USD 1746.81 M, were executed over a period of 5 months. Among the notable deals are Perfios, Credavenue and Oxyzo who have joined the Unicorn club with their latest rounds. Open too joined this club after entering into a Joint Venture with IIFL.

Has the Funding Winter Actually Arrived?

With fewer investors knocking the doors of large fintech startups for Series C+ funding, there is chatter in the market that funding has dried up and that ‘winter has arrived’. However, has it?

VCs are actively investing in Early Stage startups, and Series B has seen similar funding as last year. 37 startups have received Pre Series A funding totalling to USD 120 M as of May 2022, which is almost 50% of what the segment received during 2021.
Series A has seen 17 startups receiving USD 429 M till now, which is only 9% less than what the segment received in the entirety of 2021. It’s summer for these startups! Series B has witnessed 10 startups receive USD 435 M and should close the year at par with what the segment received last year. So why is everyone pressing the panic button?

Series C and beyond has seen less funding because of general negative sentiment worldwide. Only 11 startups received funding for these rounds, as opposed to 44 startups in 2021. With the war
beginning in February of this year and the muted performance of startups that have launched their IPOs, investors are being more cautious in their investment approach. Additionally, Series C+ received a whopping USD 5B+ in funding in 2021. Some well funded startups have spent lots of capital to grow disproportionately without having any real revenue or profitability structure in place. Thus, investors are actually waiting for their portfolio to begin performing.

Funding Across Segments

In 2021, Payments had dominated the funding landscape, drawing in approximately USD 3B. Lending and Open Banking followed suit, both receiving almost USD 1.3 B each. This year, Lending is leading the race with 29 startups receiving USD 770 M, which is half of what the segment received last year and should end the year at par with 2021.
Wealthtech has seen 27 startups receive funding in just 5 months, as opposed to 29 throughout 2021. It can be observed that this segment as a whole is witnessing more traction and innovative business models thrive. Payments has seen USD 377 M in funding, with entities like Pine Labs and Refyne receiving the majority of it, making them a part of the Top 30 Investments of 2022 (till May). Open Banking may not have received a similar level of funding as
last year, but it will certainly continue to grow. The Joint Venture between Open and IIFL to launch a neobank catering to MSMEs indicates that there is a lot of space for similar engagements which will benefit consumers. Enabler witnessed high traction, and has received funding of USD 138 M. Perfios has joined the Unicorn club after raising USD 70 M. Insurtech saw minimal action, but the segment has potential to grow. A report will be released at the end of June, 2022 with The Digital Fifth’s perspective on the trends that will be witnessed in funding. 

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