Enterprise Fintech Funding Up 140% This Quarter, Signaling Boost in Investor Confidence

Investor confidence is ostensibly on the rise as enterprise fintech funding increased considerably in the first quarter of the year, rising 140.4% from the previous quarter.

According to PitchBook’s Q1 2023 Enterprise Fintech Report, the enterprise fintech space attracted $11.8 billion in investments across 336 deals in Q1 2023.

However, as much as $6.5 billion of the funding came from Stripe’s round, which skewed the figures.

Excluding Stripe’s deal, enterprise fintech funding increased by a meager 7.6% from Q4 2022, and lowered significantly by 64.1% from the previous year.

“We anticipate VC activity will stay at similar levels throughout 2023, given current market volatility and caution in the banking sector,” PitchBook said in the report.

Investor interest in B2B (business-to-business), particularly in late-stage B2B fintech startups, dominated the top fintech deals in the first quarter of the year.

Enterprise fintech companies accounted for 79.7% of fintech VC deal value in Q1, as investors see them as being more stable and less exposed to consumer risks than other sectors.

What Were the Largest Deals in the First Quarter of 2023

The largest deals in Q1 include Generate’s sustainable capital provider deal worth $880.6 million, payments provider PhonePe‘s $642.5 million deal, carbon credit marketplace Xpansiv’s $525.0 million deal, and payroll and HR platform Rippling’s $500.0 million Series E deal.

The median deal size for enterprise fintech companies was $4.6 million, a 9.0% decrease from 2022. Angel and seed companies, on the other hand, saw a 26.3% increase in median deal size.

Moreover, the median deal size for early-stage, late-stage, and venture-growth stage companies decreased by 14.1%, 50.2%, and 5.5%, respectively.

The overall declines in pre-money valuation medians across all stages were “unsurprising, given private market valuations are still lagging behind those of their public peers,” the report said.

Global VC Funding Resumes Downtrend in Q1 Amid Banking Crisis

Despite a few large deals that made headlines in the venture capital (VC) industry, global VC funding was down in Q1 of 2023.

According to a report from Crunchbase, the total global funding reached $76 billion in Q1, marking a 53% decline year-over-year from $162 billion in 2022.

This figure includes the reported $10 billion investment into OpenAI, largely from Microsoft, as well as the $6.5 billion round for payments company, Stripe.

Without these two large deals, Q1 venture funding would have fallen to approximately $60 billion.

Every funding stage over the previous quarter was down, with a range of 44%-54% year-over-year – showing that the slowdown is not confined to late-stage funding.

Investors at each stage also scaled back, as they took time to evaluate new investment opportunities and guide existing portfolio companies.

The banking crisis served as an additional shock to the weakened funding environment.

As reported, major US lender Silicon Valley Bank collapsed on March 10. The bank had over 20,000 startup depositors and around $209 billion worth of assets, while its total deposits were at around $175.4 billion.

The impact of SVB’s collapse was not limited to US startups, as it was also the go-to bank for startups worldwide, sourcing funding from US venture firms.

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