Startup funding in 2023 lowest in 5 yrs as big-ticket deals dip: Report

Funding rounds of $100 million+ fall 69% compared to 2022; only two unicorns created after 23 last year

Funding for Indian technology startups declined 72 per cent in 2023, making it the lowest-funded year in the last five years, said a report on Friday.

Startups have got $7 billion yet this year compared to $25 billion last year. India continues to be the fourth in rank as the highest-funded geographies globally in 2023.
 

The last quarter (Q4) received $957 million, the lowest-funded quarter since Q3 2016, according to Tracxn Geo’s 'Annual Report: India Tech 2023'. Late-stage funding in 2023 has declined by more than 73 per cent to $4.2 billion compared to $15.6 billion in 2022. There have been 17 funding rounds of $100 million+ each yet this year, dropping 69 per cent compared to last year.

 

Fintech, which is driven by increasing smartphone penetration and government initiatives for a cashless economy, has received $2.1 billion in funding in 2023, a decrease from $5.8 billion last year.

PhonePe, a digital payments company, is the top-funded company in fintech by securing $750 million in four Series D rounds. PhonePe makes up for 38 per cent of the funding received by the sector. Perfios, Insurancedekho, and Kreditbee are some other top-funded fintech companies in 2023.

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Retail sector has got $1.9 billion, a 67 per cent drop compared to 2022. Eyewear brand Lenskart, which raised $600 million in two Series J rounds, is the top-funded retail company this year.

Enterprise application is the third-highest funded sector in 2023 after securing $1.56 billion, but financing for it decreased 78 per cent compared to the previous year.

Environment and space technology sectors get investor attention despite funding slowdown for other startups. Environment tech received $1.2 billion in funding and space got $122 million after private companies were allowed in the sector.

Two unicorns created

Only two new unicorns were created, digital lender Incred and online grocer Zepto, in 2023 compared to 23 last year, said the report, referring to a privately held startup valued at over $1 billion. There were 119 acquisitions, a 36 per cent drop compared to 187 acquisitions in 2022.

Initial public offering (IPO) numbers did not see a major drop this year when 18 tech companies went public compared to 19 in 2022. Ideaforge, Yatra and IKIO Lighting are some of the notable tech IPOs of 2023.

Bengaluru, Mumbai, and Delhi-NCR continue to attract significant funding in India’s tech startup ecosystem with LetsVenture, Accel, and Blume Ventures, being the top investors supporting the growth of the India Tech space.

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“While the funding slowdown in 2023 presents challenges for the Indian tech startup ecosystem, we remain optimistic about the future. With favourable government policies and a fast-growing economy, we believe India is well-positioned for success in the years to come. Our focus remains on innovation and creating value, and we are confident that the industry will rebound and flourish,” said Neha Singh, co-founder of Tracxn.

The report comes on a day when the Reserve Bank of India said it had hiked the gross domestic product (GDP) growth forecast for 2023-24 (FY24) to 7 per cent from 6.5 per cent earlier.