Indian startup funding fell by 36% in January-June to $3.8 billion, the lowest half-yearly number in the last four years, as investors are taking longer time in due diligence of every aspect of business, according to a PwC India report.
“The Indian startup ecosystem reported the lowest six-month funding in the last four years in H1CY23 at $3.8 billion across 298 deals – a decline of nearly 36% as compared to H2 CY22 ($5.9 billion). Fintech, SaaS and D2C continued to be the most funded sectors in H1 CY23,” the report said.
“There is a slowdown in startup funding despite significant untapped capital reserves held by venture capitalists (VCs). Active VC firms in India have secured new funds in the past year and we can expect the pace of investments to pick up in the next few months,” said Amit Nawka, Partner-Deals and India Startups Leader, PwC India.
Early-stage deals accounted for 57% of the total funding in the first half of 2023 (H1 CY23) in volume terms.
In value terms, early-stage deals contributed to approximately 16% of the total funding in H1 CY23 but were at their lowest in H1 CY23 as compared to the previous two years.
Eighty M&A deals involving start-ups were executed in H1 CY23. Of these, 80% were domestic transactions and the rest were cross-border transactions.
SaaS, D2C, fintech, ecommerce B2B and logistics and autotech continue to be the top five invested sectors based on the funding received in the first half of the year.
Bengaluru, Delhi-NCR and Mumbai continue to be the key startup cities in India, representing around 83% of the total start-up funding activity in H1 CY23.
Decline in Startup Funding : Analysis
The decline in startup funding is a sign of the current economic slowdown. Investors are becoming more cautious and are taking more time to do their due diligence before investing in startups. This is likely to continue in the near future, as the global economy remains uncertain.
However, there are still some bright spots in the Indian startup ecosystem. The M&A market remains active, and there are still some sectors that are receiving significant funding. Overall, the outlook for Indian startups is still positive, but it is important to be aware of the current challenges.
Call to Action
If you are a startup founder, it is important to be aware of the current funding environment and to be prepared to adjust your business plan accordingly. You should also focus on building a strong team and on developing a clear value proposition. With hard work and dedication, you can still be successful in the current environment.
