In 2023, startup funding in India dropped by over 62% to Rs 66,908 crore from Rs 1,80,000 crore in 2022, according to a report published on Tuesday by industry intelligence platform PrivateCircle Research. These funding figures represent the lowest since 2018, when Indian entrepreneurs raised a total of Rs 1,00,930 crore. In 2021, the most amount of funding—Rs 2,41,787 crore - was raised.
Data from the "Startup Deals Report 2023" study also revealed that, in comparison to 5,114 agreements in 2022, the volume of funding deals decreased by a more dramatic 72% in 2023 to 1,444 deals. This figure is also the lowest since 4,122 deals were completed overall in 2018.
The production of unicorns in India also showed signs of slowing down. Incred and Zepto were the only two Indian firms to become unicorns in 2023. India will see 23 new unicorns in 2022. According to the PrivateCircle study, despite the slump, organizations with solid business fundamentals were nevertheless able to raise significant sums of money. The Abu Dhabi Investment Authority gave $500 million to Lenskart in the largest fundraising round.
Despite raising an additional $600 million, PhonePe's funding round was not taken into consideration because of its parent company Walmart. Regarding startup funding, 100X.VC was the most active venture capitalist based on the volume of investment deals they had completed. In 2023, it closed more than 50 deals. On the list, 100X.VC was followed by Blume Ventures and Inflection Point Ventures.
The fintech sector maintained its market share advantage in secondary deals. When an existing shareholder sells their shares to a third party, a secondary round occurs. E-commerce dominated secondary deals during the 2021 financing boom, followed by fintech and media & entertainment. Fintech has been at the forefront in 2022 and 2023. It was succeeded in 2023 by agritech and SaaS.
Still, there has been a decline in the quantity of secondary transactions. Out of these 117 startups, 13 secondary deals were recorded in 2023. This represents an 80% decrease in deal count from 84 secondary deals in 2022 and 155 deals in 2021.
The scenario is probably going to become better in 2024, according to PrivateCircle's director of research, Murali Loganathan. "Even though funding rounds have slowed down, venture capital funds are sitting on ample dry powder," Loganathan stated.
"Funds can only raise capital during the first three of their 10-year investment cycle. We anticipate a pick-up in venture capital activity later this year, because investors have been taking a conservative stance for the past nearly two years."
