In Charts: How Startup Funding Fared In 2023

The funding environment dampened in 2023, with muted interest from investors looking to park funds in India’s burgeoning startup ecosystem. Funding dropped as much as 62% to about Rs 67,000 crore, or roughly $8 billion, according to data accessed by NDTV Profit from PrivateCircle Research—a private market data provider. The funding environment dampened in 2023, with muted interest from investors looking to park funds in India’s burgeoning startup ecosystem.

Funding dropped as much as 62% to about Rs 67,000 crore, or roughly $8 billion, according to data accessed by NDTV Profit from PrivateCircle Research—a private market data provider. Facebook X (was Twitter) In fact, funding declined so severely, that just the amount raised by startups in the first quarter of calendar year 2022 exceeded that of the entire calendar year 2023. Facebook X (was Twitter) The funding environment has been weak over the last 18 months, driven by global macro headwinds, according to Ashish Sharma, managing partner at InnoVen Capital—a venture debt firm.

Sharma expects that it will remain sluggish as 2024 begins. “Only after we start seeing a reversal in some of the macro headwinds, like global inflation coming down and U. S.

Fed lowering interest rates as well as an improved geopolitical situation can one expect a gradual improvement in the funding environment. From an Indian standpoint, we also need to keep an eye on the general elections as well as the state of the overall economy. How the public tech stocks perform will also have some bearing on the market sentiment,” he said.

Some of the Covid-19 darling sectors like edtech, digital media, gaming and Web 3. 0 are seeing lesser investor interest due to slowing growth, struggles with some large players as well as some regulatory challenges, Sharma said. Even with muted sentiment, there were startups that managed to raise large, triple-figure amounts at incremental valuations.

While Zepto made headlines for turning unicorn amid such an environment, Lenskart, Builder. ai and DMI Finance were some others that convinced investors and made it to the top 10 largest fundraises of the calendar year. Deepak Gupta, a general partner at WEH Ventures, said 2023 was a “year of reckoning” for the startup ecosystem.

“The boom times of 2021 became a speck in the rear-view mirror and funding rounds at Series ‘A’ and beyond became severely constricted. Going into 2024, with a thaw in the IPO market and tempering global interest rates, we expect a rebound in venture activity,” Gupta said. “Consumer spending across online and online products and services will create multiple vectors of opportunity.

As the cycle reverts, certain sectors that have been in the shadows such as edtech may come back to the forefront. Meanwhile, digital public infrastructure-linked opportunities and Gen AI should see good action as well. ” Among institutional investors, it was 100X.

VC that led the charts as the most active investor, according to PrivateCircle data. Close behind were big names such as Peak XV Partners and Blume Ventures, among other smaller funds and venture capital networks on the top 10 most active private equity and venture capital fund ranking. Facebook X (was Twitter) Following up on an active 2023, Shashank Randev, the founder of 100X.

VC, said they will continue to “actively invest in potential startups within the next six months”. “While acknowledging the possibility of occasional slowdowns, the overall sentiment seems optimistic, especially for startups showcasing promise and actively contributing to their respective industries,” he said. “We are sector-agnostic and will explore opportunities across all industries.

However, I feel that agritech, fintech, SaaS, consumer tech, and cleantech, among others, will draw heightened attention. There’s a particular interest in the enterprise sector,” Randev said. Outlook For 2024 After a glum 2023, the outlook for 2024 is more optimistic, according to investors.

Sunish Sharma, founder and managing partner at Kedaara Capital, expects increased deal activity. “Despite a more measured pace compared to recent years, the private equity landscape in India is gaining momentum, receiving heightened interest from global players as well. At Kedaara Capital, we have strategically invested in six companies, envisioning substantial growth potential in the coming years.

. . ” he said.

“Our focus remains sharp on key sectors—consumer and derivatives, financial services, technology services and healthcare —as we believe these sectors will play a pivotal role in India’s growth story. ” Karan Verma, co-founder and director at FAAD Network, forecasts a bullish trajectory in 2024, with potential funding ranging between $15-20 billion. “Emerging sectors like beauty and personal care, health and wellness, diagnostics, clinics, gaming, app studios, and personal loans are poised to take center stage in the evolving startup landscape,” he said.

For Saloni Jain, a founding partner at Sunicon Ventures, a notable surge in funding for deep tech startups is expected, indicating a shift from the dominance of software-as-a-service companies. “This shift reflects India’s hidden strength in cultivating deep research, paving the way for innovative startups. .

. Additionally, a decline in the emergence of direct-to-consumer brands as funded entities is foreseen due to market saturation. Consolidation within the space will focus on optimising logistics, supply chain, and marketing costs to ensure healthier profit margins,” she said.

The rise of homegrown venture capital funds and family offices as key investors is also anticipated, as many of the foreign investors have started exiting from the country, Jain said. “This shift is poised to burst the valuation bubble, with strategic players actively supporting the startup ecosystem, fostering sustainable business growth,” she said. .