Indian tech start-up ecosystem has witnessed a significant funding decline of 72 per cent in 2023, making it the lowest-funded year in the last five years.

The tech start-up ecosystem received a total funding of $7 billion received so far this year, compared with $25 billion in the previous year, as per Tracxn Geo’s quarterly report. The last quarter (Q4) recorded the lowest funding of $957 million to date, marking it the lowest-funded quarter since Q3 2016.

India is the fourth highest-funded geography globally in 2023.

The late-stage funding declined by over 73 per cent to $4.2 billion in 2023 from $15.6 billion in 2022, while the number of $100 million+ rounds recorded were only 17, dropping by 69 per cent compared with last year.

The fintech sector received $2.1 billion in funding so far in 2023, a decrease from $5.8 billion from the same period last year.

Top-funded companies

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 has received $1.9 billion in funding, marking a 67 per cent drop compared with 2022. Lenskart, with $600 million raised in two Series J rounds, emerges as the top-funded company in the sector this year. While, enterprise applications, the third-highest funded sector in 2023, has seen a decline of 78 per cent compared with the previous year, securing $1.56 billion in funding.

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

Optimistic outlook

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.

Only two new unicorns were created -Incred and Zepto against 23 in the previous year and 119 acquisitions as compared with 187 acquisitions in 2022, a 36 per cent drop.

Route Mobile, Arcion and Gram Power were some of the major acquisitions in 2023. However, IPO numbers did not see a major drop this year with 18 tech companies going public in 2023 till date compared with 19 in 2022. Ideaforge, Yatra and IKIO Lighting are some of the notable tech IPOs of 2023.

“While the funding slowdown in 2023 presents challenges for the Indian tech start-up 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. Our focus remains on innovation and creating value, and we are confident that the industry will rebound and flourish,” said Neha Singh, co-founder, Tracxn.