Indian startup funding hit a four-year low

Funding for Indian startups dropped by 36% in H1 CY23, reaching a four-year low of USD 3.8 billion. The decline is due to investors conducting thorough due diligence before making funding decisions.

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According to a report by PwC India, funding in Indian startups plummeted by 36 percent in H1 CY23, hitting a four-year low at USD 3.8 billion. The decline can be attributed to investors engaging in comprehensive due diligence before making funding decisions.

While early-stage deals constituted 57 percent of the total funding in terms of volume, their contribution in value was around 16 percent, lower than the past two years. However, fintech, SAAS, and D2C sectors remained the most funded.

Despite the challenging funding market, investors continued to support their portfolio companies by increasing investments in those showing positive growth. Amit Nawka, Partner – Deals & India Startups Leader at PwC India, expressed optimism, stating that the funding slowdown is a temporary phase and expects investments to rebound as active VC firms have secured new funds.

Although VC funding declined, M&A transactions in the startup ecosystem remained steady with 80 deals, mostly domestic. SaaS, FinTech, and e-commerce/D2C sectors witnessed the highest number of M&A transactions.

In terms of sector-wise investment, SaaS, D2C, FinTech, e-commerce B2B, and Logistics and AutoTech received the most funding, accounting for 89 percent of the total. Bengaluru, NCR, and Mumbai remained the primary startup cities, representing 83 percent of funding activity, while Chennai experienced higher funding in the SaaS space.