Indian Startups Face Funding Winter as November Records Six-Year Low

• ByStartupStory     |    December 1, 2023

Venture capital (VC) funding for Indian startups hit a six-year low in November, witnessing a sharp decline of about 66 percent from the previous month, totaling $223 million in 35 deals, according to data from Venture Intelligence shared on December 1.

The funding winter is evident, with cautious investors slowing down on closing rounds, leading to a considerable year-on-year decline of 78.2 percent from November 2022. The impact is part of a broader trend affecting the overall funding for 2023, with Indian startups securing about $7.05 billion till November, marking a significant 71 percent drop from the previous year’s $24.36 billion.

Investors have become more selective, weighing their options before committing to new ventures. The caution among investors, combined with the usual lower funding activity toward the year-end and during the festive season, has contributed to the decline in funding numbers.

Mitesh Shah, founder of VC firm IPV, commented on the scenario, saying, “Now people are weighing all the options before committing to anything.”

Late-stage funding rounds have notably disappeared in the last two months, continuing a trend from earlier in the year. In 2023, startups recorded only 45 late-stage funding deals with a total funding of $1.9 billion, down from 77 deals with funding of $6.8 billion in the previous year.

Despite the challenges, there are signs of early-stage funding showing greenshoots, with the top deals in November ranging from seed to series B. Investors anticipate a better deal flow in 2024 and a potential comeback for late-stage deals in the latter half of the year.

Anirudh Damani, Managing Partner at Artha Venture Fund, expressed optimism, stating, “I believe the numbers are trailing the actual sentiment. There is a lot more positivity and excitement going into the final calendar month of 2023.”

Damani expects a robust year for investing in 2024, with a potential flurry of activity in the next two quarters, especially post the 2024 elections. Despite the current challenges, there is confidence in the recovery of the private markets, aligning with the equity markets’ record highs.

Among the most active VCs, Peak XV Partners (formerly Sequoia India) led with 39 deals, followed closely by Blume Ventures and Accel India with 26 and 20 deals, respectively. Rainmatter Capital and Nexus Venture Partners followed as well, with investments in 16 and 13 companies this year.

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