A recent report on Friday highlighted a significant 72% decline in funding for Indian technology startups in 2023, marking it as the lowest-funded year in the last five years. The total funding for startups this year stands at $7 billion, a stark contrast from the $25 billion recorded in the previous year. Consequently, India has slipped to the fifth position among the world’s highest-funded geographies in 2023, down from the fourth spot it held in 2022 and 2021.
The final quarter (Q4) of the year received a mere $957 million, marking the lowest-funded quarter since Q3 2016, as per Tracxn Geo’s ‘Annual Report: India Tech 2023’. Late-stage funding also experienced a substantial dip of over 73%, totaling $4.2 billion in 2023 compared to $15.6 billion in the previous year. The number of funding rounds exceeding $100 million each has seen a 69% decrease compared to last year, with only 17 such rounds recorded.
In the fintech sector, which is propelled by increased smartphone penetration and government initiatives for a cashless economy, funding decreased from $5.8 billion last year to $2.1 billion in 2023. Leading the funding in fintech is PhonePe, a digital payments company, securing $750 million across four Series D rounds, contributing to 38% of the sector’s total funding. Other notable fintech companies in 2023 include Perfios, Insurancedekho, and Kreditbee.
The retail sector witnessed a 67% decline in funding, totaling $1.9 billion in 2023. Lenskart, an eyewear brand, secured the highest funding in the retail category with $600 million raised in two Series J rounds.
Despite being the third-highest funded sector with $1.56 billion, enterprise applications faced a significant 78% drop in financing compared to the previous year. However, the environment and space technology sectors attracted investor attention, with $1.2 billion allocated to environment tech and $122 million to space tech after private companies gained entry into the sector.
The report noted the creation of only two new unicorns in 2023, namely digital lender Incred and online grocer Zepto, in contrast to the 23 new unicorns established the previous year. Acquisitions also experienced a 36% decline, dropping from 187 in 2022 to 119 in 2023.
In terms of Initial Public Offerings (IPOs), the numbers remained relatively stable, with 18 tech companies going public in 2023 compared to 19 in 2022. Notable tech IPOs of 2023 include Ideaforge, Yatra, and IKIO Lighting.
Bengaluru, Mumbai, and Delhi-NCR continue to be major hubs attracting significant funding in India’s tech startup ecosystem, with investors like LetsVenture, Accel, and Blume Ventures playing crucial roles.
Neha Singh, co-founder of Tracxn, expressed optimism despite the funding slowdown, citing favorable government policies and a rapidly growing economy as factors that position India for success in the years to come. The report coincided with the Reserve Bank of India’s announcement of an upward revision of the gross domestic product (GDP) growth forecast for 2023-24 to 7%, up from the earlier estimate of 6.5%.
Joseph Gutierrez holds Master’s degree in Business Administration. As an avid day trader, he is a master of technical analysis and writes tirelessly on how stocks are trading. Joseph has extensive knowledge in technical analysis & news writing. He delivers news reports regarding Market category.
