The funding winter continues to hit the startup ecosystem in the country in the backdrop of macroeconomic challenges and geopolitical conditions.

According to latest data, venture capital (VC) funding activity in the country suffered a steep decline both in terms of deal volume and value in January 2024 as against the same month last year.

The impact was more prominent in terms of value. A total of 77 VC deals were announced in the country in the month with a disclosed funding value of $382.9 million, showing a drop of 30 per cent in deal volume and 50 p.c. in deal value

It, however, continues to fare better as a key VC funding destination in the Asica-Pacific (APAC) region.

“Indian startups were able to raise a total of $770.6 million worth of VC funding across 100 deals during January 2023,” Aurojyoti Bose, Lead Analyst at research firm GlobalData, said.

“The decline being more prominent in terms of value reflects the severity of investor cautiousness for big-ticket investments,” he said.

Apart from several macroeconomic challenges and geopolitical conditions that have been impacting investor sentiments across most of the markets globally, concerns regarding valuations, profitability and business models of Indian startups also seem to be forcing investors to exercise more caution while placing their bets.

“The severity of the dent in investor sentiment while committing big investments can also be understood from the fact that India did not see the announcement of even a single VC deal valued more than $100 million during January 2024,” he said.

Silver lining

Despite the setback, the country, however,  continues to be a key destination for VC funding in the Asia-Pacific (APAC) region. India stands second after China in terms of both deal volume and value.

The country accounted for a 15.5 per cent share of the total number of VC deals announced in the APAC region during January 2024, while its share in terms of deal value stood at 9 per cent.