In 2023, India's startup funding hit a five-year low at $7 billion, marking a staggering 73% drop from the previous year's $25 billion. This decline comes amid global macroeconomic challenges fueled by geopolitical tensions.
According to research platform Tracxn, the fourth quarter of 2023 witnessed the lowest equity investments in new-age ventures since the underperforming third quarter of 2016. The quarterly report by Tracxn Geo stated that startups secured $1.5 billion between July and September, followed by approximately $957 million in October and November 2023.
The report also highlighted that the funding had declined across all stages, with early-stage funding (70 per cent) and seed-stage funding (60 per cent). With this, India's global ranking also dropped a place to 5th position in the list of the highest-funded geographies globally in 2023.
Investor Landscape: Notable Players and Sector Highlights
According to reports, LetsVenture, Accel, and Blume Ventures emerged as the most active investors in 2023. Fintech, retail, and enterprise applications stood out as the top three sectors attracting capital this year, contributing to only two new unicorns.
Tushar Dhawan from Plus91Labs highlighted the challenge faced by companies reliant on heavy capital injections, citing the closures of ZestMoney and Frontrow. He emphasized the need for leaner models, optimizing cloud resources, and shifting towards operational cash flows for financial sustainability.
Recent Funding Snapshot: December 2023 Insights
Recent reports from Entrackr detailed that 20 Indian startups secured $130 million in funding between December 4 and December 9. This included four growth-stage deals and 14 early-stage funding rounds.
Only 2 unicorns in 2023
One of the major setbacks for the sector has also been the presence of only two unicorns (startups valued over $1 billion) this year - Incred and Zepto, as opposed to 23 in the previous year. The trend indicated the persisting challenges faced by companies to achieve substantial valuation and growth trajectories but experts are optimistic. "With favourable government policies and a fast-growing economy, we believe India is well-positioned for success in the years to come.
IPO numbers
Another key highlight of the report remained the robust initial public offering (IPO) momentum. IPO numbers did not see a significant drop, with 18 tech companies going public (offering stakes) in 2023 till date as compared to 19 in 2022. Ideaforge, Yatra and IKIO Lighting are some of the notable tech IPOs this year.