'Funding Winter' Grips Indian Startups As VC Deals Plunge 37.9% to USD 7.8 Billion in 2023

Startups in India secured a total of USD 7.8 billion through 1,085 venture capital (VC) funding deals announced from January to December 2023, according to a report by GlobalData. This marks a substantial 37.9 per cent decrease in terms of VC funding deals volume compared to the announcement of 1,748 deals during 2022.

GlobalData's Financial Deals Database analysis revealed that the decline in terms of value stood high at 63 per cent compared to USD 21.2 billion worth of VC funding deals announced during 2022.

Lead Analyst at GlobalData, Aurojyoti Bose, said, “The funding winter, which started in the last quarter of 2021, continued to prevail thereafter but was harsher for 2023. Apart from several factors such as macroeconomic challenges, ongoing conflicts, and geopolitical tensions, concerns around startup valuations also had a major dent in investor sentiments for India. This seemed to have resulted in a dramatic shift in focus towards sustainable growth and profitability.”

The report highlighted that it took only four months for India to surpass the USD 10 billion mark in total VC funding value in 2022. However, in 2023, the total VC funding value failed to reach this milestone.

Startup Optimism Rising

“Nevertheless, there are some bright spots as well, and the environment is not so gloomy for startups with a clear roadmap and strong fundamentals. Funding secured by some of the startups despite challenging conditions is indicative of this,” Bose noted.

India accounted for 5.6 per cent of the global total number of VC funding deals announced in 2023, with its corresponding disclosed deal value representing 3.3 per cent.

Indian VC Resilience

“Despite the setback, India continues to be a key Asia-Pacific (APAC) market for VC funding activity, standing just next to China. Moreover, it is also among the top five markets globally in terms of both VC funding deal volume and value,” she added.

Some of the notable VC funding deals announced in India during 2023 included USD 340 million worth of funding raised by Udaan, USD 229 million of funding secured by Perfios Software Solutions, USD 200 million raised by PhonePe, and USD 200 million of funding received by Zepto, among others.