All cities witnessed a decline in funding except for Chennai.
The Indian startup ecosystem reported the lowest six-month funding in the last four years in H1CY23 at $3.8 billion across 298 deals.
Funding in Indian startups experienced a significant 36% decline in the January-June period, amounting to $3.8 billion, as per a recent PwC India report. This figure marks the lowest half-yearly amount recorded in the past four years. The report suggests the decline in investors’ heightened caution and extended due diligence procedures, as they thoroughly assess all facets of a business before making financial commitments.
According to the ‘Startup Perspectives- H1 2023’ report, a significant 57 per cent of total investments during the first half of the calendar year 2023 were categorised as early-stage deals in terms of volume. However, when it comes to value, early-stage deals only accounted for approximately 16 per cent of the total investment, marking the lowest level compared to the previous year.
“The Indian startup ecosystem reported the lowest six-month funding in the last four years in H1CY23 at $3.8 billion across 298 deals- a decline of nearly 36 per cent as compared to H2 CY22 ($5.9 billion). Fintech, SAAS and D2C continued to be the most funded sectors in H1 CY23,” it said.
The report highlights that despite facing challenging market conditions in recent quarters, investors have exhibited robust support for their portfolio companies. Interestingly, they have doubled down on their investments in companies demonstrating positive growth.
Amit Nawka, Partner and India Startups Leader at PwC India said, “When it comes to the current investment outlook for Indian startups, it is crucial to view a funding winter as a temporary phase within a startup’s journey”.
During the first half of CY23, venture capital funding declined, but the number of mergers and acquisitions (M&A) transactions remained steady compared to the previous half. 80 M&A deals took place involving startups, with 80 per cent being domestic transactions. Similar to VC funding, SaaS, FinTech, and e-commerce and D2C sectors continued to witness the highest number of M&A transactions in the first half of CY23.
Bengaluru, Delhi-NCR and Mumbai continue to emerge as the winners in the Indian startup scene as per a report by PwC India. These cities were responsible for around 83 per cent of the total startup funding activity during the first half of CY23. In addition, the report highlighted a decline in funding activity across all cities during the first half of CY23, except for Chennai. Interestingly, Chennai experienced higher funding specifically in SaaS.
Over the past decade, India has experienced a remarkable surge in its startup culture particularly in sectors such as fintech, e-commerce and technology. Startups, including PhonePe, Mobikwik and Snapdeal, among others have emerged during this period.