Indian start-ups see lowest funding in four years in H1 2023; SaaS tops the charts
Edtech deals plummet by 91 per cent, while D2C, online gaming and foodtech received more funds
- Jul 14, 2023,
- Updated Jul 14, 2023 12:20 PM IST
The Indian start-up ecosystem witnessed a significant decline in funding during the first half of calendar year 2023 (H1CY23), as it fell to a four-year low. There were 298 deals that raised $3.8 billion, reflecting a sharp decrease of almost 36 per cent with H2CY22, as per a PwC India report. If compared to the first half of the previous year, funding value declined by 79 per cent when start-ups raised $18.3 billion across 729 deals.
As per the report titled “Startup Perspectives—H1 CY23”, SaaS, D2C, fintech, e-commerce B2B, and logistics remained the top five sectors in terms of investments. These sectors collectively accounted for approximately 89 per cent of the total funding received in H1 CY23 in terms of value.
Edtech was one of the most adversely affected sectors in this period, as deal value decreased 91 per cent to just $68 million in H1 from $790 million H2CY22. Around 60 per cent of the deals in the sector were growth-stage funding rounds, with an average ticket size of $10 million. Notably, BYJU’S and upGrad contributed significantly to H2CY22 deal value, when they raised over $200 million each.
Eight start-ups—Lenskart, FreshToHome, Builder.ai, InsuranceDekho, KreditBee, Mintifi, Zetwerk and Infra.Market—witnessed funding rounds of $100 million or above during H1CY23.
“Active VC firms in India have secured new funds in the past year and we can expect the pace of investments to pick up in the next few months. In the interim, there has been an increase in the due diligence being carried out by investors before making investments, both in terms of detailing as well as coverage - from typical finance and legal, to areas like technology, HR and business processes - to ensure that the start-ups have a robust corporate governance framework,” said Amit Nawka, Partner—Deals & India Startups Leader, PwC India.
While most sectors saw a decline, D2C, online gaming and foodtech reported higher investments.
SaaS contributed 30 per cent of the total funding during the period with start-ups raising $1.1 billion across 107 deals, which was still 21 per cent lower compared than H2CY22.
In H1CY23, D2C sector witnessed about three times more funding that in the past six months, with companies in the sector raising $981 million compared to $333 million in the previous half-year period. Investments raised by Lenskart and FreshToHome accounted for 72 per cent of the funding received in this sector.
Funding value in fintech sector decreased by 50 per cent to $604 million from 1.2 billion in H2CY22. Approximately 62 per cent of the deals (in terms of deal count) in this space were driven by early-stage funding rounds, with an average ticket size of $5 million. About 64 per cent of the funding received by this sector was driven by InsuranceDekho, KreditBee and Mintifi.
Logistics and autotech sectors raised $303 million, down 36 per cent from the last six-month period while healthtech funding decreased 77 per cent to $80 million from $346 million in H2 CY22.
Funding in foodtech sector increased fourfold in H1CY23 to $47 million from $11 million in H2CY22 in value terms.
The online gaming sector witnessed an increase in funding activity, recording a threefold jump in H1CY23 at $60 million compared to the previous six-month period. Funding activities in this sector are driven mostly by early-stage funding rounds, which contributed 73 per cent of the total funding during H1CY23. The GST Council’s decision to levy a 28 per cent GST on online gaming is expected to have a negative impact on the sector’s ability to attract venture funding in coming months.
The Indian start-up ecosystem witnessed a significant decline in funding during the first half of calendar year 2023 (H1CY23), as it fell to a four-year low. There were 298 deals that raised $3.8 billion, reflecting a sharp decrease of almost 36 per cent with H2CY22, as per a PwC India report. If compared to the first half of the previous year, funding value declined by 79 per cent when start-ups raised $18.3 billion across 729 deals.
As per the report titled “Startup Perspectives—H1 CY23”, SaaS, D2C, fintech, e-commerce B2B, and logistics remained the top five sectors in terms of investments. These sectors collectively accounted for approximately 89 per cent of the total funding received in H1 CY23 in terms of value.
Edtech was one of the most adversely affected sectors in this period, as deal value decreased 91 per cent to just $68 million in H1 from $790 million H2CY22. Around 60 per cent of the deals in the sector were growth-stage funding rounds, with an average ticket size of $10 million. Notably, BYJU’S and upGrad contributed significantly to H2CY22 deal value, when they raised over $200 million each.
Eight start-ups—Lenskart, FreshToHome, Builder.ai, InsuranceDekho, KreditBee, Mintifi, Zetwerk and Infra.Market—witnessed funding rounds of $100 million or above during H1CY23.
“Active VC firms in India have secured new funds in the past year and we can expect the pace of investments to pick up in the next few months. In the interim, there has been an increase in the due diligence being carried out by investors before making investments, both in terms of detailing as well as coverage - from typical finance and legal, to areas like technology, HR and business processes - to ensure that the start-ups have a robust corporate governance framework,” said Amit Nawka, Partner—Deals & India Startups Leader, PwC India.
While most sectors saw a decline, D2C, online gaming and foodtech reported higher investments.
SaaS contributed 30 per cent of the total funding during the period with start-ups raising $1.1 billion across 107 deals, which was still 21 per cent lower compared than H2CY22.
In H1CY23, D2C sector witnessed about three times more funding that in the past six months, with companies in the sector raising $981 million compared to $333 million in the previous half-year period. Investments raised by Lenskart and FreshToHome accounted for 72 per cent of the funding received in this sector.
Funding value in fintech sector decreased by 50 per cent to $604 million from 1.2 billion in H2CY22. Approximately 62 per cent of the deals (in terms of deal count) in this space were driven by early-stage funding rounds, with an average ticket size of $5 million. About 64 per cent of the funding received by this sector was driven by InsuranceDekho, KreditBee and Mintifi.
Logistics and autotech sectors raised $303 million, down 36 per cent from the last six-month period while healthtech funding decreased 77 per cent to $80 million from $346 million in H2 CY22.
Funding in foodtech sector increased fourfold in H1CY23 to $47 million from $11 million in H2CY22 in value terms.
The online gaming sector witnessed an increase in funding activity, recording a threefold jump in H1CY23 at $60 million compared to the previous six-month period. Funding activities in this sector are driven mostly by early-stage funding rounds, which contributed 73 per cent of the total funding during H1CY23. The GST Council’s decision to levy a 28 per cent GST on online gaming is expected to have a negative impact on the sector’s ability to attract venture funding in coming months.