Venture capital-backed investments in the fintech sector have dropped to $6.1 billion across 404 deals in the first quarter of the calendar year 2020 globally, according to the market intelligence platform CB Insights, reflecting the tough going for businesses in the pandemic-induced economic downturn.
The economic shocks stemming from the outbreak of the coronavirus have decreased investor appetite for fintech leading to the worst Q1 since 2016 for fintech deals and the worst Q1 for funding since 2017, a CB Insights report said.
Investors have started pulling back on early-stage bets to focus on fortifying portfolios for a forecasted recession which is quite evident from the fact that in Q1’20 early-stage fintech startups saw mere 228 deals, a 13-quarter low, and $1.1 billion of funding, a 9 quarter low.
From around 59% quarterly deal share in Q4’19, seed and angel rounds dropped to 56% in Q1’20. In Q1’19, the deal share was around 64%.
China bore the maximum brunt of COVID-19’s impact throughout Q1’20 as it witnessed just 29 deals worth $175 million during the time. It had the worst quarter for fintech since 2015. Asia saw a 69% drop in funding to $883 million and a 23% drop in deals in quarter-over-quarter, added the report.
While there were $421 million worth deals in India during Q1’20, in China, the total deals worth stood at $175 million during the time. Whereas in Q4’19, China deals stood at $299 million, and in India, they were $215 million. Clearly, India has superseded China in fintech funding during the first quarter of 2020, the first time ever in the last 5 quarters.
Globally too, Q1’20 saw only 13 mega-rounds worth $2.6 billion, the lowest deal count since Q2’2018, and lowest combined funding since Q3’2018. Fundings in North America, Australia, South America, and Africa also dropped as the pullback which started in China due to COVID-19 quickly started spreading to other countries as well.
In addition, the report has also revealed most active fintech VCs from Q1’19 to Q1’20 in which 500 startups, Ribbit Capital and Accel Partners were among the top 5 active investors.
Given the current status of the spread of coronavirus in India and globally, the future seems a bit grim for VC investments. So far, India has reported 74,480 positive cases with 2,415 deaths. The number of positive COVID-19 cases worldwide has crept to over 4.3 million.
According to another recent report of KPMG, VC investments in Indian startups have fallen sharply to $2.2 billion in Q1’20. At the end of the Q4’2019, VC investments in India were quite strong, the number as high as $6 billion.