Indian startup ecosystem emerges as one of the top three funded geographies in H1 2023, after the US and the UK.
The total funding declined by 24% in H1 2023, compared with H2 2022 and by more than 72% as against H1 2022
Environment Tech, FinTech, and Retail were the top-performing sectors in H1 2023; While there were no new unicorns in H1 2023, the period witnessed 74 acquisitions
The first half of 2023 also witnessed 14 100M+ funding rounds, marking a 17% increase; Bengaluru led the maximum total funding raised followed by Delhi NCR and Mumbai
Bengaluru, NFAPost: Market intelligence platform Tracxn in its report states that the Indian startup ecosystem faced a challenging first half of 2023 as funding experienced 24% decline at $5.5 billion compared to $7.3 billion during the same period last year.
unveiled its latest report, the Tracxn Geo Semi Annual Report: India Tech- H1 2023. This proprietary document provides comprehensive insights into the Indian startup ecosystem, covering funding raised by startups, investors’ exits through acquisitions and IPOs, and key trends shaping the fundraising landscape.
According to the Tracxn Geo Semi Annual Report: India Tech- H1 2023, India still ranks among the top three funded geographies globally (after the US and the UK), the region’s funding trend mirrored the declining trend witnessed around the world.
The total number of funding rounds also experienced a substantial decrease in H1 2023 (536), with a drop of 43% compared to H2 2022 (946) and 66% compared to H1 2022 (1586).
Commenting on the findings of their report, Tracxn Cofounder Neha Singh said despite India being one of the top-performing countries across the globe with respect to funding in the private sector, the report finds that India is currently facing a deceleration in funding due to inflation and other macroeconomic factors.
“Nevertheless, India still continues to be one of the fastest-growing economies. India’s startup ecosystem ranked third in terms of funding in 2022, and it moved up to second in Q1 2023, and there is a tremendous amount of growth potential,” said Tracxn Cofounder Neha Singh.
Late-stage rounds in H1 2023 witnessed a decline of 71%, amounting to $3.8 billion, compared to H1 2022. Early-stage rounds secured $1.4 billion, reflecting a 44% decline from H2 2022 and a significant 73% drop from H1 2022. Seed-stage rounds faced a similar fate, with a 41% drop from H2 2022 and a 71% fall from H1 2022, securing only $315 million in funding.
Comparing quarterly data from this year, both Q1 and Q2 2023 raised similar amounts of funding. Q2 2023 witnessed $2.7 billion in funding, a 65% decline from the same period in 2022, and Q1 2023 raised $2.8 billion, reflecting a 76% decline from the previous year.
Despite these challenges, the first half of 2023 witnessed 14 funding rounds surpassing $100 million, marking a 17% increase from H2 2022. In H1 2023, the top-performing sectors were Environment Tech, FinTech, and retail. The Environment Tech segment witnessed a 7% growth in funding compared to H2 2022, with a 25% drop compared to H1 2022. The rise in this sector can be attributed to the growing Electric Vehicles (EVs) industry in the country, driven by rising EV adoption and favorable government policies promoting cleaner mobility.
The FinTech sector also attracted significant funding, with India ranking among the top five geographies globally. The widespread adoption of digital payments and increasing internet penetration contributed to India’s appeal as an attractive destination for FinTech investments. The government’s efforts to establish a cashless economy further supported the growth of the sector in both rural and urban areas.
The retail sector experienced substantial growth due to the booming e-commerce space in the country. The adoption of online payment platforms and the expanding internet penetration in Tier-2 and Tier-3 cities contributed significantly to the sector’s success. This growth provided Micro, Small, and Medium Enterprises (MSMEs) with access to a vast national and international market, fostering their overall growth.
In H1 2023, saw no new unicorns, marking a significant decline from the 19 new Unicorns in H1 2022 and six in H2 2022. Acquisitions in the Indian startup ecosystem also saw a decline, with 74 acquisitions in H1 2023, a marginal 4% decrease compared to H2 2022 and a 52% fall from H1 2022.
Notable acquisitions included Gram Power, a provider of energy management solutions, acquired by Squared Capital for $100 million, and Adpushup, an ad optimization solutions provider, acquired by Geniee for $70 million. Two companies, Robu Labs and Homesfy, successfully became IPOs in the first half of 2023.
Tracxn Cofounder Abhishek Goyal said the investment environment has seen a plunge in funding, but there is a revolution in Tier 2 and Tier 3 cities with an increased rate in the number of startups being formed, which is fuelling the country’s economic growth.
“The lack of unicorns in the first half of the year is a dampener, but the addition of 60 companies to the soonicorn club and the funding of 212 companies for the first time is a silver lining amidst the global headwinds,” said Tracxn Cofounder Abhishek Goyal.
Bangalore emerged as the leader in total funds raised during this period, followed by Delhi NCR and Mumbai. The top investors in H1 2023 were 100X.VC, IPV, and Accel. IPV, Y Combinator, and 100X.VC stood out as the top seed investors, while Peak XV Partners, Accel, and Athera excelled as early-stage investors. Avataar Ventures, ASVF, and Filter Capital showcased their prowess as top late-stage investors.
About Tracxn:
Tracxn Technologies Ltd. is a data intelligence platform for private market research, tracking 2 million entities through 1800+ feeds categorised across industries, sub-sectors, geographies and networks globally. It has become one of the leading providers for private company data and ranks among the top five players globally in terms of the number of companies and web domains profiled.
