Funding Winter Intensifies: Indian Startup Funding Tanks 81% YoY To $693 Mn In February

The funding slowdown began at the start of last year when Russia invaded Ukraine. A year later, the war is still ongoing, and the ripples of the same have continued to shake the Indian startup ecosystem.

Although hopes ignited after Indian startups saw funding inching closer to the $1 Bn mark in January, for the first time since November 2022, February quashed them all.  

The startup ecosystem could raise only $693.47 Mn across 67 funding deals, according to the data compiled by Inc42. In fact, February has been the worst month for startup funding since August 2019, when Indian startups could lap up only about $251 Mn.

The total funding raised last month was down 28.53% month-on-month (MoM) and 81% year-on-year (YoY). Not only this, the total number of funding deals declined 59% YoY to 67 from 164 deals a year ago, and 17% on an MoM basis.

Last month, the startup ecosystem cherished only three mega deals (worth more than $100 Mn in value), with InsuranceDekho, FreshToHome and PhonePe taking home a total of $354 Mn. For context, this amount was 51% of the total funding raised in February.

There was an on-year fall across all stages in terms of startup funding last month, with late-stage funding lagging the most – down 88% YoY.

However, on the positive side, after a long time, growth-stage startup funding surpassed late-stage funding, as the startups in this category raised $381 Mn in 20 deals, while late-stage startups could only lap up $214 Mn in three deals during the month. 

In fact, growth-stage funding rose 140% MoM in February from $159 Mn in January.

Meanwhile, late-stage Indian startup funding sustained a 65% MoM fall, as startups under this category could raise only $214 Mn in February against $611 Mn in January.

While growth-stage startups stole the show last month, investors were seen betting more on the fintech space. 

Indian fintech startups raised $289 Mn in February, followed by consumer services at $130 Mn, and enterprisetech at $66 Mn.

Edtech and ecommerce startups could only raise $53 Mn and $52 Mn, respectively, last month.

When it comes to funding deals, enterprisetech topped the charts with 13 deals, followed closely by ecommerce at 12, and edtech at 8 deals. Meanwhile, deeptech and fintech stood at seven and six deals, respectively.

Bengaluru retained its crown as the top startup hub of the country, with the startups in the region raising $344 Mn last month. Interestingly, nearly half of the total startup funding raised in February went to Bengaluru.

Delhi NCR remained a distant second at $192 Mn, followed by Hyderabad and Chennai at $41 Mn and $40 Mn, respectively.

The prolonged funding winter has forced Indian startups to look at ways to survive by cutting costs and extending their runways, resulting in mass layoffs by many.

According to Inc42’s ‘Indian Startup Layoff Tracker’, as many as 80 Indian startups have fired 22,919 employees since the beginning of 2022.