Tracxn, a leading global SaaS-based market intelligence platform, has recently published its highly anticipated Geo Quarterly Report: FinTech US – Q3 2023. This comprehensive report provides valuable insights into the US FinTech sector, leveraging Tracxn’s extensive database.
The US FinTech industry continues to dominate as the most funded FinTech startup ecosystem globally in Q3 2023, consistent with the prevailing trends. Furthermore, it has consistently held the position as the second-highest funded sector within the US startup ecosystem. However, the sector experienced peak funding in 2021, gradually declining thereafter. In Q2 2023, there was a brief resurgence in funding, but unfortunately, it once again followed a downward trajectory. In fact, September recorded the least funding activity in Q3 2023 and was the second-lowest month in terms of funding for the entire year, after February.
This decline in funding can be attributed to various factors, including the global economic slowdown, rising interest rates, and the lingering effects of the banking crisis. These challenges have made it increasingly difficult for investors to make informed investment decisions within the FinTech space.
In Q3 2023, the US FinTech startup ecosystem raised a total funding amount of $2.7 billion, representing a substantial 74% decline compared to the $10.2 billion raised in Q2 2023, and a 51% decline from the $5.5 billion raised in Q3 2022.
The significant drop in funding can mostly be ascribed to the decline in late-stage investments. Late-stage funding experienced a staggering 84% decline in Q3 2023, with only $1.3 billion raised compared to the impressive $8.1 billion raised in the previous quarter (Q2 2023). This figure also reflects a decline of 34% when compared to the $2.1 billion raised in the corresponding quarter last year (Q3 2022).
Early-stage funding also exhibited a downward trend, with just $1.2 billion raised in Q3 2023. This amount represents a 37% drop compared to the $1.9 billion raised in Q2 2023, and a 56% decline from the $2.75 billion raised in Q3 2022.
Seed-stage funding, typically a crucial stage for early-stage startups, experienced a 37% decline in Q3 2023, with only $187 million secured. This figure pales in comparison to the $297 million raised in Q2 2023 and the $632 million raised in Q3 2022.
Sadly, only one new Unicorn emerged in the third quarter of 2023, mirroring the result of Q2 2023. However, seven companies successfully raised funding rounds exceeding $100 million, demonstrating the persistence of investor interest in select FinTech startups. Remarkably, one of these companies managed to raise an impressive $300 million.
On a less positive note, Q3 2023 did not witness any Initial Public Offerings (IPOs), reflecting the same scenario as the corresponding quarter last year. This marks a decline from the single IPO observed in the previous quarter. Nevertheless, the FinTech sector did experience 45 acquisitions during the quarter, though this represents a decrease from the 46 deals observed in Q2 2023, and a sharp contrast from the 71 acquisitions witnessed in Q3 2022.
In terms of funding distribution among different cities, San Francisco emerged as the leader, followed closely by Boston and Miami. FinTech companies based in San Francisco raised an impressive $586 million in Q3 2023, while those headquartered in Boston and Miami secured funding amounts of $356 million and $326 million, respectively.
The release of Tracxn’s Geo Quarterly Report: FinTech US – Q3 2023 provides valuable insights into the state of the US FinTech ecosystem. Despite the decline in funding observed in Q3 2023, certain cities and companies continue to attract significant investment, which reinforces the resilience and potential of the FinTech sector.
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