Startups in India raised approximately USD 5.1 billion across 226 deals (early to late stages) in Q2 CY23, signaling a slowdown in amount of about 66 per cent and volume (about 36 per cent) as compared to Q2 CY22, revealed a recent report by 1Lattice (PGA Labs).
Investments in all stages experienced a significant decline, with growth stage suffering the largest drop in absolute terms (USD -4.5B), while late stage fell the most in % terms (-94 per cent).
The report revealed that the average deal size fell by about 47 per cent to USD 22.5 million, as compared to Q2 CY22 (USD 42.6 million), while early-stage deal volume increased to approximately 75 per cent from about 61 per cent in the same period.
SaaS and Artificial Intelligence was the most attractive sector for early-stage investments with funding of about USD 167 million followed by consumer apps and platforms. Majority of late-stage investments came from e-commerce and listing platforms (approximately USD 184 million), the report added.
Another report by Redseer highlighted that the major challenges faced by startups during this financial year were increasing cost of capital and interest rates, decline in value to technology stocks, recession in developed markets, and slowdown in consumer internet growth.
Most startups are now focusing on expediting their path to profitability. Startups have substantially improved their profitability in FY22. Approximately 50 per cent unicorns are expected to become profitable by FY27. The top three sectors that are expected to drive the highest pool of profit in the next 3-4 years are FinTech and financial services, B2B and Saas and e-commerce, it said.
FinTech funding in India has also witnessed a slight decline in the month of July, recording about USD 164 million from 10 deals, compared to USD 190 million from 16 deals in the previous month.
A total of USD 7475 was raised by the FinTech sector in 2021, USD 4041 million in the previous calendar year, from January, 2022 to December, 2022 and about USD 2262 has been raised till now, from January to July, 2023.
