India’s VC Funding Falls to Lowest Level Since 2019, Reaching $7.3B in 2023
India’s share of total global venture capital (VC) funding in 2023 fell to its lowest level since 2019, reaching only $7.3 billion. This represents a significant drop compared to the previous year, when funding hit $20.6 billion and accounted for 4.8 percent of the global figure. The decline in VC funding can be attributed to the struggles faced by most Indian startups in raising money without compromising on their earlier valuations.
Indian Startups Struggle as VC Funding Drops by One-Third in 2023
According to data from CB Insights, funding to Indian startups fell by nearly a third in 2023 compared to the previous year. The $7.3 billion in VC funding received by Indian startups accounted for just 2.9 percent of the total global figure. This decline in funding can be attributed to the challenges faced by startups in raising money at their desired valuations. Many VCs focused on funding smaller startups with lower risks, leaving late-stage startups struggling to raise funds without reducing their valuations or being told to come back when they became profitable.
India Contributes Only Two New Unicorns Amid Global Surge in 2023
While the global data shows that there were 71 new unicorns in 2023, with 21 of them in Asia, India only contributed two new unicorns to this list. This is a significant drop compared to the previous year when India had 22 new unicorns. This decline in new unicorns can be seen as a reflection of the challenges faced by Indian startups in raising VC funding.
India’s Share of Global Deals Drops to 3.6% in 2023
In 2023, India’s share of total global deals also saw a decline, accounting for only 3.6 percent of all deals. This is down from 4.2 percent in the previous year. The decrease in India’s share of global deals can be attributed to the challenges faced by startups in raising funds and securing deals. There was only one Indian deal in the list of top 10 global deals in Q4 2023: The Udaan fund raiser at $340 million, albeit at a lower valuation.
Funding Pattern Shifts in India as Late-Stage Startups Struggle to Raise Funds
The funding pattern in India has undergone a shift, with late-stage funding accounting for a smaller share of the total funding in 2023. Late-stage funding accounted for only 9 percent of the total funding, down from 12 percent in the previous year. On the other hand, the share of mid-stage funding decreased by 2 percentage points, while the share of early-stage funding increased by 3 percentage points, reaching 78 percent in 2023. This shift in funding pattern can be attributed to the challenges faced by late-stage startups in raising funds without reducing their valuations.
Overall, the decline in VC funding in India reflects the challenges faced by Indian startups in raising funds at their desired valuations. The decrease in funding share has also narrowed the gap between India and China, with China also experiencing a sharp decline in VC funding. The fall in funding in both countries has contributed to a significant drop in funding for the Asian region as a whole, as well as at a global level. Despite the challenges, the US was able to maintain a strong position in VC funding in 2023, albeit with a slight drop from the previous year.
Analyst comment
Negative news: India’s VC funding has reached its lowest level since 2019, falling to $7.3B in 2023, a significant drop from the previous year when funding hit $20.6B. This decline can be attributed to the struggles faced by Indian startups in raising money without compromising on valuations. As an analyst, I predict that the market will remain challenging for Indian startups, with a continued decrease in VC funding and difficulties in raising money at desired valuations, especially for late-stage startups.
