Startups in India raised approximately USD 4.3 billion across 183 deals in Q4 CY23, signaling a slowdown in total funding, of about 20 per cent, while deal volume decreased to 183 from 243 deals, a decline of about 17 per cent compared to Q3 CY23, revealed latest report by 1 Lattice.
Investment amount gradually dropped throughout CY23 while Q4 CY23 saw a significant drop compared to the same quarter last year. About USD 3.7 billion was raised through equity investments, while USD 0.5 billion through debt deals in Q4 CY23, it added.
The report further revealed that investments across stages experienced a significant decline, while growth stage witnessed a significant uptick. Growth stage witnessed the largest growth (approximately 85 per cent in deal value) compared to previous quarter due to improving macro factors in the domestic market.
Early-stage deal volume suffered a decline approximately 64 per cent from about 74 per cent as investors shifted their focus in growth stage companies, indicating a lower risk appetite and maturity in the market. The average deal size fell by about 7 per cent to USD 26.7 million as compared to the previous quarter.
The median deal size decreased from USD 5.7 million in CY22 to USD 4 million in CY23, signaling heightened investor caution due to concerns about inflation, rising interest rates, and a global recession, said the report.
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 highest investments in Q4 CY23 were for Flipkart and Reliance retail with a funding amount of USD 600 million each. For the current quarter, SaaS / AI was the most attractive sector for early-stage investments (USD 118 million) while ecommerce & listing platforms was for growth stage investments (USD 1,101 million).
Seafund (6 deals) & Nexus venture partners (4 deals) were the most prominent investors for early stage & growth stage investments respectively in Q4 CY23, said the report.
In India, a total of USD 7475 million 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 2982 has been raised till now, from January to December, 2023.
In CY23, the highest was raised by payments giant PhonePe. The company raised USD 350 million in January, USD 100 million in February, USD 200 million March, USD 100 million in April and another USD 100 million in May. A total of USD 850 million was raised since January till May, 2023.
According to a latest report by Tracxn, India ranked 3rd globally in 2023 in terms of FinTech startup funding, strengthening its position as a significant player on the global stage.
However, like all other sectors, funding in the FinTech space has also been experiencing a downward trend in India as well as on a global scale. The FinTech sector received funding of USD 2 billion in 2023, a decline of 63 per cent and 76 per cent compared to previous years.
