Startup funding in India fell 62% to six-year-low in 2023: PrivateCircle

The funding deal volume fell by a sharper 72% in 2023 to 1,444 deals as compared to 5,114 deals in 2022

The startup funding in India fell over 62 per cent in 2023 to Rs 66,908 crore as compared to Rs 1,80,000 crore in 2022, a report released by market intelligence platform PrivateCircle Research on Tuesday said. These are the lowest funding numbers since 2018 when the startups in India raised Rs 1,00,930 crore.

The highest funding was gathered in 2021 at Rs 2,41,787 crore.

The data in the report titled "Startup Deals Report 2023" also showed that the funding deal volume fell by a sharper 72 per cent in 2023 to 1,444 deals as compared to 5,114 deals in 2022. This is also the lowest number since 2018, when the total number of deals was 4,122.

The slowdown was also visible in the making of unicorns in India. Only two startups, Incred and Zepto, achieved unicorn status in India in 2023. In 2022, India had seen 23 new unicorns.

The PrivateCircle report said that although there was a slowdown, the companies which had strong business fundamentals still managed to raise big rounds. Lenskart raised the biggest funding round of $500 million from the Abu Dhabi Investment Authority.

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PhonePe had raised an even bigger round of $600 million, but it has not been considered as it was from its parent Walmart.

In terms of who funded the startups, 100X.VC topped the list of most active venture capitalists in terms of number of investment deals. It closed over 50 deals in 2023. Inflection Point Ventures and Blume Ventures followed 100X.VC in the list.

In terms of secondary deals, the fintech industry continued to lead the market share. A secondary round takes place when an existing shareholder sells their shares to a third party.

During the funding peak in 2021, e-commerce led the secondary deals, followed by fintech and media & entertainment. In 2022 and 2023, fintech has continued to lead. In 2023, it was followed by SaaS and agritech.

However, there has also been a dip in the number of secondary deals. In 2023, 13 secondary deals were reported across these 117 startups, which is an 80 per cent drop in deal count as compared to 84 secondary deals in 2022 and 155 deals in 2021.

According to Murali Loganathan, director of research at PrivateCircle, the situation is likely to improve in 2024.

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"Even though funding rounds have slowed down, venture capital funds are sitting on ample dry powder," said Loganathan.

"Funds usually have a 10-year cycle for investments, and they can only raise capital in the first three. Given that the cautious approach of investors has now continued for almost two years, we expect to see VC activity pick up pace later this year."