Tracxn, a leading global SaaS-based market intelligence platform, has released its FinTech - US Semi-Annual Funding Report - H1 2023. The report, which is based on Tracxn’s extensive database, provides insights into the US FinTech space.

Funding into US-based FinTech startups fell in H1 2023 fell 33% when compared with H1 2022, but rose 42% from H2 2022. The US FinTech space attracted investments worth $12.8 billion in H1 2023, which is 58% of the total funds raised by the global FinTech startup ecosystem during the same period. 

Despite facing challenges during H1 2023, the US-based FinTech startups have displayed remarkable perseverance. While funding experienced a 33% dip compared with H1 2022, it rebounded with a 42% surge from H2 2022. During H1 2023, the US FinTech sector managed to attract significant investments amounting to a staggering $12.8 billion, accounting for 58% of the total funds raised by the global FinTech startup ecosystem during the same period.

Late-stage investments played a pivotal role, constituting the bulk (44%) of the total funding in H1 2023. The exceptional growth can be attributed to a remarkable 141% increase in late-stage funding, outperforming the figures from H2 2022.

Both seed-stage and early-stage funding have dipped in the last year-and-a-half. Early-stage funding in H1 2023 dropped by 22% and 57% when compared with H2 2022 and H1 2022 respectively. Seed-stage funding in H1 2023 decreased by 39% and 59% when compared with H2 2022 and H1 2022, respectively. 

About 80.5% of the total funding raised this year was in Q2 2023. Q2 witnessed total funding of $10.3 billion, a growth of 46% from the corresponding quarter last year. Q2 2023 is also the highest funded quarter in the past one year, since Q2 2022. 

In H1 2023, the number of $100 million+ rounds fell to 10, which 38% lower than 16 such rounds in H2 2022. Further, there were only two new entrants to the Unicorn club in H1 2023, a sharp contrast from 29 in the same period last year. 

This space witnessed 98 acquisitions in the first six months of 2023, significantly lower than 165 and 129 in H1 2022 and H2 2022, respectively. On the IPO front, there has been very little activity in the past year-and-a-half, with H1 2022, H2 2022 and H1 2023 witnessing only one IPO each. 

The Payments, Investment Tech, and Cryptocurrencies segments emerged as the top-performing sectors within the FinTech industry during the first half of 2023. Notably, Payments startups raised a total of $7.7 billion during H1 2023, accounting for 60% of the total funding received within this space. This considerable growth in the Payments industry can be attributed to the surging trend of online payments and the advancement of more convenient payment technologies, emphasizing speed and simplicity.

In terms of city-wise funding, San Francisco took the lead in H1 2023, accounting for more than 63% of total funds raised in the US in this sector. FinTech startups in San Francisco attracted investments worth $8.1 billion, followed by companies in New York ($1.4 billion) and Los Angeles ($296 million). 

Y Combinator, Andreessen Horowitz and Techstars, were the most active investors in this space. Y Combinator, Spartan Group, and Susa Ventures were the top seed investors, while Commerce Ventures, Human Capital, and Viola Group were the top early-stage investors. CapitalG, Geodesic Capital, and Cross Creek were the top late-stage investors. 

As the global FinTech market faces challenges associated with the ongoing funding winter, rising interest rates, and economic uncertainties, the US FinTech sector's perseverance and continued growth are indicative of its potential to drive innovation and shape the future of financial technology.