India tech startups see lowest funding in five years, just two unicorns in 2023

Funding in India’s tech startup ecosystem in 2023 has been the lowest in the last five years, dropping India’s global ranking from 4th to 5th place, a new report showed on Friday.The year received $7 billion in total funding until December 5, a significant decline of 72 per cent, compared to $25 billion in the previous year.

Only two new unicorns were created this year — Incred and Zepto — as against 23 in the previous year and 119 acquisitions as compared to 187 acquisitions in 2022, a 36 per cent drop, according to the report by leading global market intelligence platform Tracxn.

The funding declined across all stages, with late-stage funding dropping over 73 per cent, followed by early-stage funding (70 per cent) and seed-stage funding (60 per cent). “While the funding slowdown in 2023 presents challenges for the Indian tech startup ecosystem, we remain optimistic about the future. With favourable government policies and a fast-growing economy, we believe India is well-positioned for success in the years to come,” said Neha Singh, co-founder, Tracxn.

Amid the funding slowdown, India has dropped from 4th place in 2022 and 2021 to fifth place among the highest-funded geographies globally in 2023.

The last quarter (Q4) recorded the lowest funding of $957 million to date, marking it the lowest-funded quarter since Q3 2016. The decline is primarily due to the biggest drop in late-stage funding, by over 73 per cent to $4.2 billion in 2023 from $15.6 billion in 2022.

The number of $100 million+ rounds recorded were only 17, dropping by 69 per cent compared to last year.

FinTech, driven by increasing smartphone penetration and government initiatives towards a cashless economy, has received $2.1 billion in funding so far in 2023, a decrease from $5.8 billion from the same period last year, said the report.

PhonePe, a leading payments company, stands out as the top-funded company in the sector, securing a total of $750 million in four Series D rounds which makes up for 38 per cent of the funding received by the sector.

Perfios, Insurancedekho, and Kreditbee, are some of the other top-funded companies in the sector this year.

The retail sector received $1.9 billion in funding, marking a 67 per cent drop compared to 2022.

Lenskart, with $600 million raised in two Series J rounds, emerges as the top-funded company in the sector this year.

Despite the overall funding slowdown, sectors such as Environment Tech and SpaceTech have garnered investor attention.

Environment Tech received $1.2 billion in funding, while SpaceTech saw a 6 per cent increase with $122 million raised so far in 2023 brought about its privatisation by the government.

Bengaluru, Mumbai, and Delhi-NCR continue to attract significant funding in India’s tech startup ecosystem with LetsVenture, Accel, and Blume Ventures, being the top investors supporting the growth of the India Tech space.