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Business News/ Companies / News/  Indian startups raise $3.8 bn in H1 2023, lowest half-yearly funding in 4 years; Saas, D2C, fintech top invested sectors
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Indian startups raise $3.8 bn in H1 2023, lowest half-yearly funding in 4 years; Saas, D2C, fintech top invested sectors

Indian startups raised $3.8 billion in H1 2023, a 36% decrease from H1 2022 and the lowest in four years, with fintech, SAAS, and D2C as the most funded sectors. M&A transactions remained stable, while Bengaluru, NCR, and Mumbai were the key startup cities.

Early-stage deals accounted for 57% of the total funding in H1 CY23 (in volume terms). Premium
Early-stage deals accounted for 57% of the total funding in H1 CY23 (in volume terms).

Indian startups raised $3.8 billion in the first half of 2023 (January to June), falling by a massive 36% as compared to the fundraising in H1 of 2022. This is also the lowest six-month funding in the last four years, as per PwC India research report. Furthermore, Fintech, SAAS, and D2C continued to be the most funded sectors in H12023.

As per PwC's data, Indian startups fundraising stood at $3.8 billion across 298 deals in H1 of 2023, compared to $5.9 billion raised in the first half of 2022.

PwC stated that fintech, SAAS, and D2C continued to be the most funded sectors in H1 CY23 as per the PwC India report titled, “Startup Perspectives - H1 CY23.

Amit Nawka, Partner - Deals & India Startups Leader, PwC India, said, “A funding winter is just a season in a startup’s journey. 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."

Nawka added, "In the interim, there has been an increase in the due diligence being carried out by investors before making investments, both in terms of detailing as well as coverage - from typical finance and legal to areas like technology, HR, and business processes - to ensure that the startups have a robust corporate governance framework."

According to PwC's report, during the last few quarters, despite challenging funding market conditions, investors have shown strong support for their portfolio companies by doubling down on their investments in companies that demonstrated positive growth. 

Here are the details of startup perspectives for H1 2023 as per PwC:

Stages of funding:

Early-stage deals accounted for 57% of the total funding in 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. Growth- and late-stage funding deals accounted for 84% of the funding activity in H1 CY23 (in value terms).

These represented 43% of the total count of deals in this period. The average ticket size in growth-stage deals was USD 19 million and late-stage deals were USD 52 million during H1 CY23.

M&A transactions:

While venture capital (VC) funding declined in H1 CY23, M&A transactions remained the same when compared to H2 CY22. 80 M&A deals involving start-ups were executed in H1 CY23.

Of these, 80% were domestic transactions and the rest were cross-border transactions. Similar to the VC funding activity, SaaS (23), FinTech (11), and e-commerce and D2C (10) continue to witness the highest number of M&A transactions during H1 CY23.

Sector-wise investment:

SaaS, D2C, FinTech, e-commerce B2B and Logi and AutoTech continue to be the top five invested sectors based on the funding received in the first half of the year. These contribute to approximately 89% of the total funding received in H1 CY23 in value terms.

In the same period, the D2C and Online gaming sectors each saw investments increase by almost 3x that of H2 CY22. In the Foodtech sector, investments increased by four times in H1 CY23 compared to H2 CY22 in value terms.

City-wise start-up funding:

Bengaluru, NCR, and Mumbai continue to be the key start-up cities in India, representing around 83% of the total start-up funding activity in H1 CY23. The decline in funding activity was noted across all cities in H1 CY23 barring Chennai, which witnessed higher funding in the SaaS space.

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Published: 09 Jul 2023, 08:54 PM IST
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