The first half of 2023 has been a challenging period for Indian startups, with a substantial decline in funding. According to data from market intelligence agency Tracxn, Indian startups raised only $5.46 billion in the first six months of this year, marking a significant 68% drop from the $17.1 billion raised during the same timeframe in 2022.
Historical Context: H1 2022 and H1 2021
For context, let’s take a look at the funding trends in Indian startups for H1 2022 and H1 2021. In 2022, Indian startups raised $17.1 billion, while in 2021, they raised $13.4 billion. This indicates that there has been a steady decline in funding over the past two years.
No New Unicorns in H1 2023
The decline in funding is not limited to early-stage investors; even late-stage investors have reduced their activity in India. The first half of 2023 saw no new unicorns emerge, compared to 18 new entrants in the billion-dollar club in H1 2022 and 16 minted during the corresponding period in 2021.
Seed Funding Deals Plummet
A closer look at the data reveals that seed funding deals have plummeted. In H1 2023, there were only 325 seed funding deals, a significant drop from the 936 deals in the same period in 2022 and 921 deals in H1 2021.
Early-Stage Funding Rounds Dwindle
Other early-stage funding rounds, primarily Series A and Series B, have also dwindled. In H1 2023, there were only 108 deals, compared to 296 in H1 2022 and 211 in H1 2021.
Late-Stage Funding Slumps
Late-stage funding has also suffered a significant decline, with only 50 deals in H1 2023, down from 122 in H1 2022 and 114 in H1 2021.
Rise of Local Capital
Despite the decline in funding, there is hope on the horizon. Several venture capital firms have secured new funds in the past 18 months, indicating that local capital will continue to play a significant role in supporting Indian startups.
Quotes from Industry Experts
"We are contained by mostly locally available capital, which I expect will be behaving in a rational manner because there’s no irrational exuberance coming in to drive valuation up," said Manish Chandra, co-founder of Arkam Ventures. "It’ll still mean that people are chasing each other for termsheets for the good founders because the next two years there will be more capital that will get deployed."
Conclusion
The first half of 2023 has been a challenging period for Indian startups, with a significant decline in funding. However, industry experts believe that local capital will continue to play a vital role in supporting these companies. As investors secure new funds and deal-making activity increases, there is hope that the pace of investments will pick up in the coming months.
Timeline: Funding Trends in India
- H1 2022: Indian startups raised $17.1 billion
- H1 2023: Indian startups raised $5.46 billion (68% decline)
- Historical context: Indian startups have consistently raised lower amounts of funding over the past two years.
Investors’ Perspective
Industry experts believe that local capital will continue to play a significant role in supporting Indian startups. As investors secure new funds and deal-making activity increases, there is hope that the pace of investments will pick up in the coming months.
Key Takeaways
- Indian startups have raised significantly lower amounts of funding over the past two years.
- No new unicorns emerged in H1 2023.
- Seed funding deals and early-stage funding rounds have plummeted.
- Local capital will continue to play a vital role in supporting Indian startups.
Future Outlook
As investors secure new funds and deal-making activity increases, there is hope that the pace of investments will pick up in the coming months. Industry experts believe that local capital will behave rationally and support good founders, leading to more investments being deployed over the next two years.
Recommendations for Startups and Investors
- Indian startups should focus on building strong relationships with local investors.
- Investors should be prepared to deploy more capital in the coming months.
- Startups should prioritize building a robust business model and scalable growth strategy.
By understanding the funding trends and industry expert opinions, Indian startups and investors can better navigate this challenging landscape.
