What’s The News?

Indian startups have faced a significant decline in funding during the first half of 2023, as several late-stage investors reduced their investments in the country due to a slowdown in the public market. Data from market intelligence agency Tracxn revealed that Indian startups raised only $5.46 billion in the first six months of 2023, marking a substantial 68% decrease compared to the $17.1 billion raised during the same period in 2022 and a drop from $13.4 billion in H1 2021.

This year has witnessed no new unicorns emerging in the Indian startup ecosystem, which is a sharp contrast to the 18 new billion-dollar startups in H1 2022 and 16 in the corresponding period of the previous year.

How It Affected
The funding decline has affected startups across different stages, with a significant decrease in seed funding deals from 936 in H1 2022 to 325 in H1 2023. Early-stage funding rounds, such as Series A and Series B, also dwindled from 296 and 211 in previous years to 108 in the equivalent periods of 2023. Even late-stage funding suffered a decline, with only 36 deals compared to 137 and 114 during similar periods in previous years.

Prominent late-stage investors like Tiger Global, SoftBank, and Insight Partners have reduced their investments in Indian startups. Sovereign funds, particularly from the Middle East region, have stepped in to finance most of the recent deals. The lack of participation from late-stage investors and the absence of IPOs have impacted the appetite of mid-stage investors, leading to downward adjustments in valuations for several high-profile Indian startups.

However, despite the setback, there is hope for Indian startups as many venture capital firms have secured new and larger funds, creating substantial untapped capital reserves. VC firms such as Peak XV Partners, Lightspeed, Accel, Elevation Capital, Matrix Partners India, 3one4 Capital, and Blume Ventures have raised new funds in the past 18 months. This availability of capital is expected to lead to an increase in investment activity in the coming months.

While the funding landscape for Indian startups has experienced a contraction in recent times, the presence of ample dry powder and rational behavior among local investors signals a potential rebound in the near future.

What’s The News?

Indian startups have faced a significant decline in funding during the first half of 2023, as several late-stage investors reduced their investments in the country due to a slowdown in the public market. Data from market intelligence agency Tracxn revealed that Indian startups raised only $5.46 billion in the first six months of 2023, marking a substantial 68% decrease compared to the $17.1 billion raised during the same period in 2022 and a drop from $13.4 billion in H1 2021.

This year has witnessed no new unicorns emerging in the Indian startup ecosystem, which is a sharp contrast to the 18 new billion-dollar startups in H1 2022 and 16 in the corresponding period of the previous year.

How It Affected
The funding decline has affected startups across different stages, with a significant decrease in seed funding deals from 936 in H1 2022 to 325 in H1 2023. Early-stage funding rounds, such as Series A and Series B, also dwindled from 296 and 211 in previous years to 108 in the equivalent periods of 2023. Even late-stage funding suffered a decline, with only 36 deals compared to 137 and 114 during similar periods in previous years.

Prominent late-stage investors like Tiger Global, SoftBank, and Insight Partners have reduced their investments in Indian startups. Sovereign funds, particularly from the Middle East region, have stepped in to finance most of the recent deals. The lack of participation from late-stage investors and the absence of IPOs have impacted the appetite of mid-stage investors, leading to downward adjustments in valuations for several high-profile Indian startups.

However, despite the setback, there is hope for Indian startups as many venture capital firms have secured new and larger funds, creating substantial untapped capital reserves. VC firms such as Peak XV Partners, Lightspeed, Accel, Elevation Capital, Matrix Partners India, 3one4 Capital, and Blume Ventures have raised new funds in the past 18 months. This availability of capital is expected to lead to an increase in investment activity in the coming months.

While the funding landscape for Indian startups has experienced a contraction in recent times, the presence of ample dry powder and rational behavior among local investors signals a potential rebound in the near future.