Is funding winter over? VCs & PEs invested $33.3 bn in Indian start-ups in H1FY23

Venture capital and private equity funds invested about $33.3 billion in the first half of FY23, according to a report by Software Technology Parks of India (STPI). This investment happened across 1,076 deals in India.
 
In addition, the investment in cities beyond the Tier I stood at $14.5 billion across 238 deals. The top sectors which have been performing well in Tier II, III and IV cities include enterprise tech, retail tech and health tech, the report revealed. 
 
India houses the third largest ecosystem of start-ups after the US and China. The number of start-ups registered with the Department for Promotion of Industry and Internal Trade has grown 133 per cent in the last six years from just 471 in 2016 to 75,442 in 2022. 
 
After braving two-and-a-half years of the COVID-19 pandemic, funds infused reached an all-time low in the first two quarters of fiscal year 2022. Indian startups raised only $752 million in September 2022, down 83 per cent as compared to the year-ago period, according to data shared by Tracxn.

The number of funding rounds also went down by 57 per cent compared to a year-ago period. On a month-on-month basis, funding dropped 15 per cent over August 2022. 
 
Not all gloom and doom
 
But the overall scenario is not all gloom and doom. Though still down by 69 per cent year-on-year, start-up funding in India saw its first uptick of the year in October after nine months of exhibiting a downward trend. Indian start-ups raised $1.08 billion in capital, up by 39 per cent as compared to September 2022, data shared by Tracxn revealed.
 
Even though late-stage funded start-ups have been taking measures to cut down expenses and become profitable in the wake of a funding crunch, the scenario is different when it comes to early-stage ones.
 
In an interaction with Business Today, Rajiv Srivatsa, Partner at Antler, said that they are doing more investments in early-stage start-ups in the last 3-4 months than ever before. The ticket size of the investments has also increased from Rs 200k to Rs 300k on an average. “Early stage funding has not been impacted at all,” he said, adding that the ecosystem has improved now. “Serious people are becoming founders, valuations have stabilised and there are fair expectations now.”
 
Srivatsa also adds that one of the biggest changes he has seen is that now investors are spending more time with their founders. There is no “hype” around closing deals quickly and the spotlight is on “building a relationship with the founder” especially “if you are coming in at the early stage staying for atleast 10 years.” 

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