The fintech and software-as-a-service (SaaS) sectors saw the highest number of funding transactions for the second straight year in 2023, according to private market intelligence platform Private Circle’s ‘Indian Startups Deal Report 2023’.

During the 2021 funding peak, e-commerce saw the highest number of secondary deals followed by fintech, and media and entertainment, among other sectors.

The report has tracked 252 secondary deals in 117 start-ups valued at $500 million and above over the last three years.

A secondary round takes place when an existing shareholder sells shares to a third-party.

“We can see fintech coming up in all three years, showing the sector’s ability to provide exits to investors. SaaS is also common in both 2022 and 2023, showing the sector’s resilience in providing exits to investors,” said Murali Loganathan, Director of Research, PrivateCircle.

In 2023, 13 secondary deals were tracked across these 117 start-ups, down 80 per cent from 84 secondary deals in 2022 and 155 deals in 2021.

Startup funding

According to the report, start-up funding dropped 62 per cent year-over-year in 2023, at ₹67,000 crore, compared to ₹1.8 lakh crore in 2022 and ₹2.42 lakh crore in 2021. The number of deals in 2023 fell 72 per cent compared to previous years. Primary funding round deals stood at 1,444 in 2023 as compared to 5,000-odd deals in 2022, the report added.

Peyush Bansal-led Lenskart raised the biggest funding round of $500 million from Abu Dhabi Investment Authority, followed by the likes of DMI Finance, PhonePe, CleanMax, and Udaan, among others.

“Even though funding rounds have slowed down, venture capital funds are sitting on ample dry powder. Funds usually have a ten-year cycle for investments and they can only raise capital in the first three. Given that the cautious approach of investors has now continued for almost two years, we expect to see venture capital activity pick up pace later this year,” Loganathan added.