Fintech funding likely to pick up in 2024
The lull in fintech funding may be nearing an end after a drop in funding activity in 2023 with VC and PE fund houses preferring fintechs with recurring revenues.
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Bengaluru, 19 January: The lull in fintech funding may be nearing an end after a drop in funding activity in 2023 with VC and PE fund houses preferring fintechs with recurring revenues.
“The bearish funding cycle for fintech startups is likely bottoming out, with deal volumes at startups in later funding stages stabilizing in recent times. The improved investor sentiment for fintechs in public markets has yet to trickle down to private markets, creating some opportunities for venture capitalists (VCs) to deploy capital at relatively attractive valuations and add alpha to returns. While it could still be a tall order for the industry to register growth in funding in the first half of 2024, S&P Global Market Intelligence anticipates that the second half to experience flat to modest growth in funding,” Sampath Sharma Nariyanuri, Fintech Research Analyst at S&P Global Market Intelligence said in a report.
“VCs will continue to prioritize capital-efficient growth and predictability in revenue. The fintech sector will increasingly leverage artificial intelligence to introduce new products, enhance the end user experience and drive incremental topline growth. A re-evaluation of investment opportunities could lead to a geographical and segment rotation for VCs,” he added.
Venture capital flows into fintechs dropped 42 per cent year-on-year to $35 billion in 2023, according to S&P Global Market Intelligence data.
Region wise, North America and Asia Pacific (APAC) regions saw a drop of 27 per cent to register investments of $17 billion and $9 billion, respectively. Meanwhile, funding in Europe, Middle East and Africa (EMEA) and Latin America plunged 62 per cent to $8 billion and 71 per cent to $1 billion, respectively.
However, it noted that funding pressures are easing as the deal count and values are stabilizing on a sequential basis. In the fourth quarter of 2023, fintech ecosystem saw 472 rounds yielding $6.7 billion, compared to 481 rounds worth $6 billion in the previous quarter.
