Moneycontrol PRO

Funding to Indian startups sinks to a 5-year-low in January as funding winter worsens

At least 15 startups, including the most-funded unicorns, let go of close to 3,000 employees in January, taking the total tally of layoffs to more than 20,000 since the start of 2022​

Bengaluru / February 02, 2023 / 11:13 AM IST

Private equity and venture capital (PE/VC) funding to Indian startups slumped to a 63-month low in January amid rising macroeconomic uncertainties, a trend that could continue for at least the first of 2023.

Indian startups raised $630 million in January from PE/VC investors across 121 deals, the lowest by value since September 2017, according to data shared by Venture Intelligence with Moneycontrol. In September 2017, startups raised $148.3 million across 39 deals, the data showed.

Investors have been going slow in funding high-growth ventures amid uncertainties caused by accelerating inflation, rising global interest rates, the specter of recession confronting the West, and the war in Europe that has disrupted supply chains.

Industry observers expect the slowdown to continue, at least in the near term, as investors wait for valuations to rationalise.

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“The first half will be tough for all (global) startups in general and not just Indian. The reason is the tentativeness in funds to invest because of global uncertainties. It is indeed a function of startups needing more time to grow to justify the valuations at which it will be prudent for startups to raise funds,” said Ashish Kumar, co-founder and general partner at Nandan Nilekani’s Fundamentum Partnership.

Tough year ahead

To put things in perspective, startups were raising $2 billion monthly on average in 2022 and $3 billion in 2021, according to the Venture Intelligence data.

In January 2022, startups raised close to $4.1 billion across 136 deals, the data showed. Even in the second half of 2022, when investors started pulling out of deals because of the worsening macroeconomic environment, startups were raising close to $1 billion monthly on average, the data showed.

In January, PE/VC funding to India’s startup ecosystem, currently the third-largest in the world, also dropped more than it did in the US and China, the world’s two biggest startup ecosystems.

“I think 2023 will be tough in general, I can't say what region will be relatively better but I feel the correlation will be strong globally. So recovery will happen together in terms of funding in startups,” Kumar of Fundamentum added.

He also said that he expects the second half of the calendar year to be “much better.”


India’s startups are already scrambling to survive the funding winter. At least 15 startups, including the most-funded unicorns, let go of close to 2,700 employees in January alone, taking the total tally of layoffs to more than 20,000 since the start of 2022.

2023 Tech layoffs continue 300123 (1)
The most bullish investors have gone slow in investing. According to data compiled by Moneycontrol, Tiger Global, and Sequoia Capital, two of the country’s most aggressive startup investors, who have backed 38 and 31 of India’s 107 unicorns, did not participate in a single funding round in January.

tiger global 3001_001 Interestingly, Sequoia Capital India raised a $2.85 billion fund last year, while Tiger Global is raising a $6 billion fund, of which India is expected to be among the biggest beneficiaries. Not just Sequoia and Tiger, other aggressive VC investors including Accel, Elevation Partners, and Matrix Partners, among others, have also raised large India-dedicated funds.

According to data compiled by Moneycontrol, VC firms have raised close to $10 billion for Indian startups since the start of 2022.

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Nikhil Patwardhan
Nikhil Patwardhan