Indian startup funding fell 72% in H1CY23, funding rounds down 66%: Tracxn

The funding of Indian startups fell sharply in the first six months of 2023, mainly due to a sharp dip in early-stage rounds, a report released on Thursday said. From $19.7 billion in the first six months of 2022, the funding dipped to $5.5 billion in the same period this year.

Compared to the previous six months, between July 2022 and December 2022, the funding was down 24 per cent from $7.3 billion.

According to market intelligence platform Tracxn's "Tracxn Geo Semi-Annual Report: India Tech-H1 2023", early-stage rounds secured $1.4 billion during the period, reflecting a 73 per cent drop from the first half of 2022. It was 44 per cent lower than in the second half of 2022.

Both seed stage and late stage rounds saw a 71 per cent dip in funding till June compared to last year.

Moreover, India did not see the emergence of any new unicorns during the period. In H1CY22, 19 new unicorns emerged in the country and six in H2CY22.

The data in the report also highlighted that the number of funding rounds also experienced a substantial decrease of 66 per cent from 1,586 in H2CY22 to 536 in H1CY23. The drop is 43 per cent as compared to 946 rounds in H2CY22.

Neha Singh, co-founder at Tracxn, said, "Despite India being one of the top-performing countries across the globe with respect to funding in the private sector, it is currently facing a deceleration in funding due to inflation and other macroeconomic factors."

Singh, however, added that globally, India is doing relatively better. The data showed that the country currently ranks third in the list of top-funded geographies globally, following the US and the UK.

"India's startup ecosystem ranked third in terms of funding in 2022, and it moved up to second in the first three months of 2023, and there is a tremendous amount of growth potential," she added. 

In all cities, Bangalore emerged as the leader in total funds raised during this period, followed by Delhi-NCR and Mumbai.

Environment tech emerges on top

Owing to the growing adoption of electric vehicles (EVs), the environment tech sector emerged as the top-funded sector in India. However, the funding in the sector was 25 per cent lower than in H1CY22. As compared to H2CY22, the funding was 7 per cent higher.

It was followed by the fintech sector owing to the "widespread adoption of digital payments and increasing internet penetration."

"The government's efforts to establish a cashless economy further supported the growth of the sector in both rural and urban areas," it said.

The retail sector was the third most funded sector in H1CY23. This was mainly due to a boom in the e-commerce industry and the adoption of online payment platforms.

"The expanding internet penetration in Tier-2 and Tier-3 cities contributed significantly to the sector's success," it added.

"The investment environment has seen a plunge in funding, but there is a revolution in Tier 2 and Tier 3 cities with an increased rate in the number of startups being formed, which is fuelling the country's economic growth. The lack of unicorns in the first half of the year is a dampener, but the addition of 60 companies to the soonicorn club and the funding of 212 companies for the first time is a silver lining amidst the global headwinds," said Abhishek Goyal, co-founder at Tracxn.