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Investors return to funding early-stage fintechs, finds startup platform Connexdoor

Investments in fintech companies stood at $2.64 billion in 2020, up by 6% from $2.49 billion in the previous year, according to a report by Connexdoor, a marketplace platform for startups. While fintech payments platforms attracted the lion’s share of funding last year, investors have been channeling their funds to early stage startups, the report said.

Overall, 137 fintechs raised funds last year through 157 deals, of which 76 deals were early stage rounds. The biggest deals last year include PhonePe‘s $788 million deal in December 2020, Navi Capital’s $457 million capital infusion in April and Razorpay‘s $100 million Series D round in October last year.

“While Investors remained cautious for high ticket sized deals, the number of deals in 2020 increased to 157 by 24% from 127 deals in 2019. Thereby indicating confidence in the Indian Fintech ecosystem and setting the right momentum for the coming year. A higher investor attraction was witnessed towards the budding early staged Fintechs, confirming the growing confidence for the Indian Fintech ecosystem” — Connexdoor Fintech Journey: The 2020 Origin Report

Investors return to Early Stage funding

Overall, the number of early stage deals increased to 76 deals worth $138 million in 2020, double the amount raised in the previous year. The three top early stage investors include Better Capital (6 deals), Sequoia Capital (6 deals) and Venture Catalysts (3 deals), the report said.

  • Lending fintechs garnered 27% of the total early stage funding
  • Financial inclusion fintechs raised 20% f the total early stage funding
  • Payment fintechs raised around 19% of the total early stage capital
  • WealthTech fintechs raised 13.2% of the total early stage capital
  • 50% of early stage funded fintechs have live products, only 5% are at an idea stage
  • 63% of the fintechs were founded by first time entrepreneurs
  • 6% of early stage founders are straight out of college with no work experience. Of which, 33% raised funds
  • Only 25% of the early stage startup founders graduated from the IIMs/IITs

Funding insights

  • Payments: $1,104 million in 2020 vs $1,430 million in 2019
  • Lending: $995 million in 2020 vs $575.5 million in 2019
  • Insurtech: $196 million in 2020 vs $136.6 million
  • Enterprise Tech: $140 million in 2020 vs $186 million in 2019
  • Wealthtech: $71 million in 2020 vs vs $54 million in 2019
  • MarketPlace : $61 million in 2020 vs $641,000 in 2019
  • Emerging Tech: $32 million in 2020 vs $9.6 million in 2019
  • Neo Bank: $21 million  in 2020 vs $78 million in 2019
  • Financial Inclusion: $19 million in 2020 vs $17.6 million in 2019

While funding to fintech payments dropped in 2020, lending fintechs raised 73% more funds in 2020 compared to the previous year. While InsureTech has been an attractive area for investors, the total investments into Neo-Banks fell by 73% in 2020 compared to the previous year.

  • PayTechs raised 41% of their funding through Series D rounds , while Insurtechs raised 37%. Razorpay and Turtle Mint were the top funded fintechs in this category
  • LendTech raised 77% of their funds through Series E rounds, while  PayTechs accounted for the remaining 23%. Capital Float and Aye Finance were the leading beneficiaries of this funding
  • Among the early-stage fintechs, UniCards raised $18.5 million , Plum raised $14.1 million and, EpiFi raised $13.2Mn

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