Indian Startup Ecosystem Facing Funding Crisis, Sees Lower Funds, Deals In 2023

Indian startups received 77 per cent less funding in 2023 so far as compared to the same period a year earlier

Indian startup market suffered from a funding crunch in the first seven months of 2023, compared to last year. As per the data shared by Venture Intelligence, Indian startups received 77 per cent less funding in 2023 so far as compared to the same period a year earlier. 

According to a Moneycontrol report, funding from private equity and venture capital stood at $4.4 billion for the Indian startups in the period from January to July in 2023, down from $19.3 billion in the same period in 2022. The data shines light on the funding conditions of the industry when there is already a fear of an internet bubble in the Indian economy. 

The data revealed that the number of funding deals secured by startups in India in the seven months of 2023 is only 344, largely down from 821 deals secured a year ago. 

Looking at investments in July alone, the data recorded an investment of $523 million against $2.6 billion invested in the same period last year. Compared to 77 funding rounds in July 2022, the current month reported only 42 rounds. The funding amount reduced by 80 per cent and the number of deals fell by about 45 per cent, both on a year-on-year (YoY) basis. 

With regards to early stage deals, the data reported about 198 deals in the January to July period in 2023. This estimate fell about 55 per cent from 442 deals, a year ago. Startups received an investment of $722 million, down by 59 per cent from $1.8 billion, on a YoY basis. 

In the growth and late-stage investment sector, startups managed to procure a funding of $3.7 billion across 146 deals, compared to $12.4 billion raised in 272 deals in the seven-month period a year earlier. 

With 21 deals in 2023, Peak XV Partners (previously known as Sequoia India) stayed at the top in the investor list. Blume Ventures secured a second position in the list with 16 deals, followed by Accel India, with 12 deals. Other notable investors included Rainmatter Capital and Lightspeed Ventures, both with 10 investments made in the reported period. 

This data comes at a time when founders like Zerodha’s Nithin Kamath, Phonepe’s Sameer Nigam, and many more have flagged concerns about the Indian internet economy bubble, which has seen a massive slowdown post the pandemic.