Indian Startup Funding Plummets by 68% as Tiger and SoftBank's Investment Activity Wanes
Indian Startup Funding Witnesses Sharp Decline in H1 2023 Amidst Market Instability
chandni
Indian startups faced a significant funding contraction in the first half of 2023, reflecting the impact of market instability on emerging regions. Data from market intelligence agency Tracxn, shared that Indian startups raised only $5.46 billion in the first six months of 2023, marking a substantial 68% decline from the $17.1 billion raised during the same period in 2022 and a drop from $13.4 billion in H1 2021.
This year has been notably devoid of any new unicorns in the Indian startup ecosystem, in stark contrast to the 18 new entrants during H1 2022 and 16 during the corresponding period in the previous year.
The funding downturn has affected startups at various stages, with seed funding deals plummeting from 936 in H1 2022 to 325 in H1 2023, according to Tracxn's data. Early-stage funding rounds, including Series A and Series B, also saw a decline from 296 and 211 deals in 2022 and 2021, respectively, to 108 deals in 2023. Late-stage funding experienced a similar slump, with only 36 deals compared to 137 and 114 during the same periods in previous years.
The slowdown can be attributed to a reduced participation of late-stage investors who were previously active in backing Indian startups. Tiger Global, for instance, has made just one deal in India this year, while SoftBank and Insight Partners, which invested heavily in late-stage startups in previous years, have been relatively inactive.
SoftBank has been focusing on increasing liquidity, reportedly selling portions of its Paytm stake on a daily basis. However, the company's CEO, Masayoshi Son, mentioned plans to resume AI investments and go on a "counteroffensive" in the near future at the company's annual general meeting.
Tiger Global also indicated that it is unlikely to make new investments in Indian startups for several months, according to a partner at the firm. Sovereign funds, particularly from the Middle East, have been the primary financiers of late-stage deals in India recently.
Industry experts, such as Rahul Chandra, co-founder of Arkam Ventures, anticipate a delay of at least two years before some prominent late-stage investors return to their previous levels of investment activity in India.
The absence of late-stage backers and a lack of IPOs have also impacted the enthusiasm of many mid-stage investors, who are struggling to adapt their underwriting models to the current public market sentiment. Several high-profile Indian startups, including Byju's, Swiggy, and PharmEasy, have experienced significant valuation adjustments, with reductions of 50% or more.
