Startup funding tanks 79% in 5 months of 2023 as funding winter worsens

Startup funding

Funding to Indian startups plunged to about a fifth in the first five months of 2023 compared to the same period last year, with no end in sight to the worsening funding winter.

Private equity and venture capital (PE/VC) funding to Indian startups fell 79 percent to $3.3 billion in the January-May period from $15.7 billion a year ago, according to data shared by Venture Intelligence. Startups secured 247 funding rounds in this period against 613 in the first five months of 2022, the data shows.

In May, investors participated in about 53 funding rounds and invested about $948 million, against $1.68 billion invested across 108 funding rounds in the year-ago period.

While the funding amount plunged about 44 percent year on year, there was a sharper decline in the number of deals, which more than halved in May 2023 from the same month in the previous year.

The funding amount did see an uptick month on month, from a low base of $342 million in about 46 deals in April, it is still below the 2022 levels.

Stage-wise funding

Growth and late-stage investments also remained under pressure.

In the first five months of 2023, startups in this stage secured $2.75 billion in funding across 105 deals against five-month average of $8.9 billion across 189 late and growth-stage deals in 2022.

According to Prashanth Prakash, founding partner, Accel, mergers and acquisition activity will pick up over the coming months. He believes funding taps for late-stage startups will run dry for the next nine-10 months.

“That is the bigger problem. Some late-stage companies will need to reset their business models, including a few who will need a total reset. Keeping that in mind, we’ll see a lot of consolidation of startups in the next six months,” Prakash said at an industry event in Bengaluru on June 1.

In the January-May 2023 period, 142 early-stage deals amounting to $549 million were recorded. Deals in this stage tanked about 54 percent from the five-month average last year which stood at 310 deals. In terms of money invested, startups received over 56 percent lower funding from its five-month average in 2022 of $1,255 million.