Venture capital inflow is still low despite macroeconomic challenges

• ByStartupStory     |    February 4, 2023

With high hopes for the Union Budget and the majority of their main suggestions not being addressed, February has started out poorly for the Indian startup sector. The meagre amount of money generated in the first week was evidence of this. 

Additionally, the government proposes in Budget 2023 that all investments made in private enterprises by foreign nationals be subject to this tax and that exemptions be granted under specific situations. This tax was formerly an annoyance, and it has returned. This has raised concerns because the Indian startup ecosystem still relies heavily on foreign funding, and according to some sources, the investment community plans to contact the finance minister for further clarification.

Only $49 million in total venture capital was seen in the first week of February, compared to $126 million the previous week. Now, it’s unclear how funding activity will increase in the upcoming weeks as a result of the generally pessimistic macroeconomic indications. 

Leading tech firms including Amazon, Meta, and Alphabet all reported financial results that fell short of forecasts. A media source claims that Tiger Global, a prominent venture capitalist (VC) investor in companies worldwide, has somewhat reduced its ambition to create a new fund from $6 billion to $5 billion.

These actions will probably have an impact on the startup ecosystem in India, not just in terms of investment but also in terms of the capacity of the firms to generate new employment. Startups across all industries have already resorted to layoffs out of concern of the coming financial winter and the recession. The money collected by VC companies, especially for Indian entrepreneurs, is the only positive aspect of the overall situation. Nearly $6 billion has been spent, and many founders anticipate that soon the ecosystem will begin to benefit.

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