Indian startup funding hits 5-year low — $7 billion in 2023, down 73 percent from 2022
The funding winter has led to a consistent decline in VC investments since mid-2022. There has been a fall in every subsequent quarter, with Q3 2023 being the worst in five years.
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By Aishwarya Anand
Funding for Indian startups has dropped to a five-year low in 2023, with a total of $7 billion having flowed into the ecosystem so far this year, according to data from Tracxn. This marks a significant decline of nearly 73% compared to the $25 billion funding recorded in 2022.
The funding winter has led to a consistent decline in VC investments since mid-2022. There has been a fall in every subsequent quarter, with Q3 2023 being the worst in five years.
Between July and September, Indian startups raised a total of $1.5 billion across 166 rounds, marking a 30% decrease from the previous quarter, as per Tracxn Geo's quarterly report.
And, with just about $957 million raised in October and November, Q4 2023 is headed to be the lowest-funded quarter since Q3 2016. Q4 will be the worst quarter in 7 years.
This decline is primarily attributed to the collapse in late-stage funding, with startups receiving only $4.2 billion dollars in 2023, a 73% drop from $15.6 billion dollars clocked in 2022. Infact, the number of $100 million plus rounds have been fewer this year — only 17 compared to 55 such deals last year.
What's to be noted is that funding has declined across all stages — about 60-70% in early and seed-stages as well. Given this funding slump, India has dropped from 4th place in 2022 and 2021 to 5th place among the highest-funded geographies globally.
It's fintech, retail and enterprise SaaS that have kept the winter from freezing over — they still found some warmth, attracting VC dollars to become the top-funded sectors.
Fintech, driven by increasing smartphone penetration and government initiatives towards a cashless economy, has received $2.1 billion in funding so far in 2023. The Retail sector has received $1.9 billion in funding.
Enterprise Applications, emerged as the third-highest funded sector in 2023, securing $1.56 billion in funding.
LetsVenture, Accel and Blume Ventures have topped the list of most active investors in 2023 to date, the report added.
However, as we exit 2023, there is a silver lining. Despite the overall funding slowdown, we have seen sectors such as AI, Deeptech, Environment, Climate, and SpaceTech garner investor attention, especially SpaceTech, which has had its best year ever, raising over $120 million in 2023 — skyrocketing on the privatization push from the government.
