India Ranks Third in Global Startup Funding Despite 24% Decline in H1 2023

• ByStartupStory     |    July 6, 2023

Tracxn’s latest report on the Indian startup ecosystem reveals a significant downturn in total funding during the first half (H1) of 2023, compared to the latter half of 2022. The decline in the second half is particularly striking, amounting to approximately 72% when compared to the first half of 2022. Indian startups managed to secure $5.5 billion in funding during H1 2023, a sharp contrast to the $19.7 billion raised in the same period the previous year, as well as the $7.3 billion raised in the second half of 2022. Surprisingly, no startup has achieved unicorn status so far this year, in stark contrast to the 19 in the first half of 2022 and six in the second half of 2022.

Despite this significant drop, India continues to maintain its position as the third-largest hub for startup fundraising, following the United States and the United Kingdom. Tracxn, a prominent data platform, reported that only one company went public between April and June 2023, in contrast to the five firms that went public during the same quarter in 2022. However, Tracxn predicts that 60 companies will soon achieve unicorn status.

“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,” according to Abhishek Goyal, co-founder of Tracxn.

Within India, Bengaluru attracted the lion’s share of funding, followed closely by Delhi-NCR and Mumbai. Bengaluru accounted for 44% of the funding in the January-March quarter and 59% in the April-June quarter. Acquisitions in the Indian startup ecosystem during the first half of 2023 totaled 74, marking a 4% decline compared to the latter half of 2022 and a 52% decline compared to the same period the previous year.

Notable acquisitions include Physics Wallah acquiring Kozhikode-based Xylem Learning, Capri Global Capital acquiring Car Lelo, and vernacular learning platform Adda247 acquiring Ahmedabad-based 3D learning platform Veeksha.

The electric car industry continues to capture investors’ interest, retaining its position as the most appealing sector for investment. Social media platforms and vernacular video streaming platforms have surged in Tracxn’s rankings, now featuring in the top 10 sectors attracting funding. Online business payment and banking software suites remain perennial favorites among investors.

The majority of funding this year has been directed towards advanced startups, including Byju’s, Ola Electric, Lenskart, PhonePe, Reliance-backed Dunzo, and Bengaluru-based healthcare app HealthifyMe. Tracxn highlights that over the past eight quarters, significant funding has been secured by companies raising funds beyond series E, such as Paytm, Swiggy, Cars24, and Meesho.

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