Indian startup funding slumps 75% year-on-year to $2.8 billion in January-March as macro challenges weigh in

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  • In the first quarter of 2023, Indian Startup raised a total of $2.8 billion, which is 75% lower compared to the same period last year ($11.9 billion).
  • The report attributes the drop in funding to rising inflation and interest rates, which have significantly impacted investment.
  • No new unicorns were created in January to March 2023, compared to 14 unicorns created during the same period last year, according to the Tracxn report.
  • The report highlighted that India is the second most well-funded region after the US in the first quarter of 2023.
  • Although India ranks second, funding is still on a declining trend.

The ongoing macroeconomic challenges have hit the Indian startup industry in terms of investor funding. According to Tracxn Geo Quarterly Report: India Tech – Q1 2023, Indian startups raised a total of $2.8 billion in the first quarter of 2023, which is 75% lower than the same period of the previous year ($11.9 billion).

The report attributes the drop in funding to rising inflation and interest rates, which have significantly impacted investment.

Start-up financing at an early stage decreased 4% to $844 million in Q1 2023 compared to the prior quarter. Meanwhile, seed funding was down 16% to $153 million from the prior quarter.

adding, late stage rounds the first quarter of 2023 also saw a sharp 79% decline to $1.8 billion from a year ago.

No new unicorns were created in January to March 2023, compared to 14 unicorns in the same period last year.

While funding is down year-over-year, the month-over-month comparison is encouraging as Indian startups saw a significant increase in funding – up 54% to $1.2 billion in March 2023 from $777 million in February.

India is the second highest funded region after the US
The report highlighted that India is the second highest funded region after the US in the first quarter of 2023. Despite the second place, funding in India is still on a declining trend.

Total total funding in India fell by 21% in Q1 2023 compared to Q4 2022 and by more than 75% compared to Q1 2022. The number of funding rounds in Q1 2023 fell by 10% and 63% compared to Q4 respectively 2022 and Q1 2022.

Companies like PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome Foods, TI Clean Mobility and KreditBee were big ticket deals in the January-March quarter, the report said.

According to the report, Bangalore held the largest share of total funds raised in the March quarter, followed by Delhi and Mumbai.

The leading sectors in finance this quarter were fintech, retail and enterprise applications. The fintech segment saw a 150% funding growth compared to the fourth quarter of 2022. However, it saw a 51% decline compared to the first quarter of 2022.

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