In 2023, funding for Indian startups has plummeted to a five-year low, recording a total of $7 billion invested in the ecosystem so far, a stark contrast to the $25 billion noted in 2022, marking a significant 73% decline. This funding downturn has resulted in a consistent decrease in venture capital investments since mid-2022, with each subsequent quarter experiencing a decline, with Q3 2023 being the most challenging in five years.
During the period of July to September, Indian startups secured $1.5 billion across 166 rounds, indicating a 30% decrease from the previous quarter, according to Tracxn Geo’s quarterly report. The primary cause of this decline is attributed to the collapse in late-stage funding, with startups receiving only $4.2 billion in 2023, representing a 73% drop from the $15.6 billion recorded in 2022. Notably, the number of $100 million plus funding rounds has significantly decreased this year, with only 17 compared to 55 such deals last year.
The report reveals an across-the-board decline in funding across all stages, with early and seed-stage funding experiencing drops of about 60-70%. Consequently, India has slipped from the 4th position in 2022 and 2021 to the 5th position among the highest-funded global geographies.
Despite the overall funding slowdown, certain sectors such as fintech, retail, and enterprise SaaS have managed to maintain momentum, attracting venture capital investments to emerge as the top-funded sectors. Fintech, driven by increased smartphone penetration and government initiatives for a cashless economy, secured $2.1 billion in funding in 2023, while the retail sector received $1.9 billion. Additionally, enterprise applications became the third-highest funded sector, securing $1.56 billion.
Notably, amid the funding challenges, sectors including AI, Deeptech, Environment, Climate, and SpaceTech have continued to attract investor attention. SpaceTech, in particular, has witnessed its best year ever, raising over $120 million in 2023, propelled by the government’s push towards privatization, as highlighted in the report.
