Startup funding dips 71% in 2023; consumer, environment tech sectors shine

Consumer tech start-ups, offering technology-driven products and services to consumers, have managed to corner the most funding at $1.6 billion

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4 min read Last Updated : Jun 14 2023 | 4:36 PM IST

Indian start-ups, across sectors, have raised a total of $5 billion in funding across 461 deals so far this year (Jan 1-May 31), according to data from Tracxn - a market intelligence platform. Despite investments having dipped almost 71 per cent from $17.1 billion in the year-ago period, when the start-up world saw an unprecedented inflow of capital, key sectors like environment tech, retail, and fintech have managed to maintain their funding lead

Consumer Tech start-ups, offering technology-driven products and services to consumers, have managed to corner the most funding at $1.6 billion.

The Fintech sector came in at a close second with $1.4 billion. Investments have, however, been mostly carried by fintech giant Phonepe, who has raised a massive $850 million as part of an ongoing $1 billion round, led by New York-headquartered investment giant General Atlantic.

“Fintech, as a sector, seems to have performed better than others amid the funding winter. We have seen many large fintech deals, be it Phonepe, Mintifi or KreditBee, coming from the space recently. Despite this, funding has definitely dropped from its peak levels,” Vikram Chachra, Founding Partner, 8i Ventures - a fintech-focused VC firm, told Business Standard earlier.

“However, there is no dearth of appetite among investors. But they have become much more selective,” he said.

Startups operating in Environment Tech, as well as Energy Tech, have also managed to corner a hefty chunk of funding this year, raising $1.1 billion each. The overall push towards EVs and renewable energy adoption are some of the major factors helping the sectors grow.

Total Funding Raised by Indian Start-ups YoY Comparison ($bn)

Period	Funding Amount
2023 YTD (Jan 1-May 31)

5 2022 (Jan 1-May 31) 17.1 Source: Tracxn

"Environment Tech is one of the sectors that has seen a significant increase in investments in 2022 and is expected to continue seeing high growth in the future," Neha Singh, co-founder, Tracxn, said.

"In 2022, India witnessed the 1 million EV sales landmark, which is a clear indication of this sector's growth in recent times. Favourable government policies such as concessional duty on EV battery components, doubling the funds for the FAME scheme, among others have helped in growing this sector in the country," she added.

According to various investors and industry watchers Business Standard spoke to, EV start-ups, as many as 18 of which are in the soonicorn (soon to be a unicorn) club, have emerged as potential contenders to join the unicorn ranks. These include companies like Ather Energy, Zypp Electric, Blusmart, Yulu, Log9 Materials, Altigreen, and Hero Electric, among others.

“The first phase of green tech was focussed on solar and now, clearly, EVs are a strong tailwind,” said Swapna Gupta, Partner, Avaana Capital – a climate tech-focused VC firm.

“We have already seen large OEM plays, as well as incumbents launching their own variants in the market. EVs present a massive opportunity for across-the-board innovation,” she added.

Indian Edtech, a sector rife with layoffs and funding cuts, has managed to raise $875.4 million in 2023 so far. Edtech unicorns have, however, found it difficult to raise funding rounds in their late stages.

Top 5 Most Funded Sectors ($)

Sector	Funding Amount
Consumer	1.6 bn
Fintech	1.4 bn
Energy Tech	1.1 bn
Environment Tech	1.1 bn
Retail	998 mn

Source: Tracxn

Going forward, funding among late-stage companies is expected to remain an impediment for edtech firms. “2023 has been a difficult year and will remain so. Late-stage companies that have over-hired and sold the wrong products or have not managed their costs will continue to face challenges,” says Vinay Bansal, founder, Inflection Point Ventures.

SpaceTech is another emerging sector in India that is witnessing increased investor interest. The Indian Spacetech sector has raised a total funding of $112 million in 2022, a growth of 22 per cent compared to 2021, and a 294 per cent uptick compared to 2020. The sector has already raised $52 million in 2023 so far this year and is expected to keep doing well in the coming months.

Most Funded Start-ups in 2023