Fundraising by Indian startups in full-year 2023 will only be a fraction of 2022 levels, going by the current run rate.
In January-September this year (9M 2023), startups in the country amassed only $8.8 billion in funding from venture investors, which is around a third of the $22.7 billion raised in the same period of 2022, show data from DealStreetAsia DATA VANTAGE‘s latest report India Deal Review: Q3 2023.
More strikingly, the fundraising as of the end of September this year ($8.8 billion) has yet to exceed the capital raised by startups in the first three months of 2022 ($12 billion).
The deal volume in 9M 2023, meanwhile, stands at 703, down from 1,245 in the corresponding period of 2022.
The number of funding transactions in the first three quarters of 2023 has not exceeded that in the first two quarters of last year (900).
Fundraising in most months of 2023 has been below the corresponding period of 2022, but the spike in September provided a silver lining.
Month-wise, the funding in August at $472 million marked the lowest investment since pandemic-hit June 2020 when startups in the country could collect only $416 million from investors as economic activity froze globally, the data revealed.
“There is an increased focus on profitability and sustainable growth in the Indian ecosystem, and models that are tough to scale are slowly being phased out,” said Pratip Mazumdar, Partner, Inflexor Ventures.
There were no billion-dollar deals in 9M 2023 nor 9M 2022. The top five fundraisers in Jan-Sept 2023 raised $2.35 billion led by PhonePe and Lenskart.
The top five fundraisers in Jan-Sept last year had raised over $3.1 billion led by VerSe Innovation and BYJU’s.
“In India, it is more about protecting the downside and not initiating down rounds. Though there are companies which might have done down rounds, the overall funding is low due to delays by companies that aren’t looking to raise in lieu of better operational efficiencies,” explained Anil Joshi, Managing Partner, Unicorn India Ventures.
Regarding the outlook for 2024, Mazumdar of Inflexor Ventures said: “VCs have raised significant funds, and pressure from supporting institutions may lead to improved funding conditions in early 2024, particularly for early-stage ventures. Our outlook for the next few quarters is cautiously optimistic.”