Indian startups witness 72% decline in funding during H1 2023: Report

Indian startups witnessed a 72% decline in funding during the first half of 2023 as compared to last year in the same period, according to a report titled ‘Tracxn Geo Semi-Annual Report: India Tech- H1 2023’. This year from January to June (H1), the total startup funding was $5.5 billion in the country. 

The report also stated that the Indian startup funding trend shows a global decline, despite being ranked among the world's top three funded geographies after the United States and the United Kingdom, CNBC reported. 

In addition, the number of funding rounds in the Indian startup ecosystem also experienced a decrease in H1 2023. In H1 2023, there were 536 funding rounds, while the numbers were 946 in H2 2022 and over 1,500 in H1 2022. 

However, India still continues to be one of the fastest-growing economies and there is tremendous growth potential in the country's startup ecosystem, said Neha Singh, co-founder of Tracxn.

In an official statement as quoted by CNBC, the company said, “The rise in this sector can be attributed to the growing Electric Vehicles (EVs) industry in the country, driven by rising EV adoption and favorable government policies promoting cleaner mobility.”

Apart from funding, India also witnessed a decline in the number of new unicorns in H1 2023, the report said, adding that the top investors of the year so far include IPV, Accel, and 100X.VC. 

The funding squeeze at Indian startups has already led to layoffs and delayed stock listings. It is set to worsen and will likely lead to industry consolidation. "This is a fundamental reset, not just another blip," said V T Bharadwaj, a former managing director of Sequoia Capital India who now leads venture capital firm A91 Partners. 

“I don't think I'll again see a record fund raise year like 2021 at least for a decade,” he added as quoted by ANI. 

Tech companies were valued richly and went public at prices that brought in huge profits for their investors. The crypto market was also booming. However, in the second half of 2022, and into 2023, interest rates rose, valuations fell along with the stock markets, and crypto markets collapsed.