Startups in India see 75% drop in funding; check details

The startup ecosystem in India saw a considerable decline in investment in the first quarter of 2023 when compared to the same period in 2018, according to the latest "Tracxn Geo Quarterly Report: India Tech - Q1 2023". 

According to the research, startup companies in India raised $2.8 billion in total in the first quarter of 2023, down 75% from the $11.9 billion raised in the same period of 2022. The rise in interest rates and inflation, which have had a considerable impact on investments, are to blame for this reduction in funding.

When compared to Q1CY22, late-stage funding drastically decreased, falling by 79% ($1.8 billion) in Q1CY23. When compared to Q1CY22, early-stage funding decreased by 68% in Q1CY23 ($844 million). 

Despite a 4% decline in early-stage funding in Q1CY23 compared to Q4CY22, there was a 54% increase from $777 million in February 2023 to $1.2 billion in March 2023, giving the Indian startup ecosystem some cause for optimism.

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The study highlighted the money raised by nine businesses, including PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome foods, TI Clean Mobility and KreditBee. In Q1CY23, PhonePe raised $650 million in total over several Series D rounds, giving the business a $12 billion valuation. 

A wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) led a $500 million Series J transaction on behalf of Lenskart, which was valued at $4.5 billion.

The three industries that received the most funding this quarter were Finance, Retail and Enterprise Applications. Although funding for the FinTech sector increased by 150% from Q4CY22 to Q1CY22, it decreased by 51% from Q4CY22 to Q1. In contrast to Q1CY22, which saw 14 unicorns arise, the quarter saw no new Indian unicorns emerge.

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Bangalore, according to the report, led all other cities in total funds raised, followed by Delhi and Mumbai. The top investors overall were 100X.VC, CIE IIITH and IPV, followed by Accel, Sequoia Capital and Alteria Capital for early-stage investments and Premji Invest, Elevation, and Chiratae Ventures for late-stage investments. The top seed investors were 100X.VC, CIE IIITH and IPV.

Also, in the first quarter of 2023, three businesses—Robu Labs, Mars Capital and Homesfy—went public. In terms of departures, the situation for QoQ acquisitions remained consistent with 46 acquisitions as opposed to 43 in Q4CY22. 

Gram Power, a company that offers energy management solutions, was purchased by Squared Capital for $100 million while Adpushup, a company that offers ad optimisation solutions, was purchased by Geniee for $70 million.