Startup Funding Plunges Nearly 80% YoY To $580 Mn In June 2023

The funding winter continued to torment the Indian startup ecosystem in June 2023, as total funding declined 78.5% year-on-year (YoY) to $580.18 Mn. The number of deals also fell 25% to 94 during the month, according to Inc42’s ‘Indian Tech Startup Funding Report H1 2023’ report.

Indian startups had raised $2.7 Bn across 125 deals in June 2022.

To put the funding situation in context, June 2023 was the worst month for Indian startup funding since August 2020, when the country’s startups only managed to raise $252 Mn in 95 funding deals. In other words, funding activity in India’s startup ecosystem in June was at its lowest in the last 34 months.

The funding raised by startups in June also fell 43.2% from $1.02 Bn in May 2023, while the number of deals increased 21% from 78.

In terms of sector, ecommerce topped the funding chart in June 2023, with the startups in the sector raising $172 Mn in 24 deals. Enterprisetech and fintech completed the podium, with the startups in the segments raising $85 Mn and $81.2 Mn, respectively.

Compared to May 2023, which saw two mega deals, June had only one such deal – Lenskart’s $100 Mn fundraise. For more context, there were six mega deals in June 2022.

While growth stage startups bagged the highest amount of funding in June 2023 by raising $218 Mn across nine deals, this was a decline of 77% and 73% YoY, respectively. Similarly, late stage startups raised $187.3 Mn in four funding deals, a decline of 88% and 80%, respectively.

Seed funding also witnessed a decline, albeit lower compared to late and growth funding. As per Inc42 data, early stage startups raised $112.23 Mn across 52 deals in June 2023, a decline of 8.3% and a rise of 19%, respectively, from June 2022.

Bengaluru Retains Top Spot

Geography-wise, Bengaluru remained the preferred startup destination for investors in June. Startups based in the capital of Karnataka secured funding of $172 Mn in June 2023. It was followed by Delhi NCR with a funding of $109 Mn.

Kozhikode, one of India’s many emerging startup hubs, made its first-ever monthly podium, as edtech startup Xylem Learning secured $61 Mn in funding from PhysicsWallah earlier this month. Raipur, at the number four spot, was another surprise addition to the top startup hubs in June, as Drools secured $60 Mn in funding at a valuation of $600 Mn.

Both Kozhikode and Raipur made it to the top courtesy of the two large and rare deals. The two cities had seen only seven funding deals between 2014 and May 2023, raising just about $4 Mn during this period.

Mumbai was in the fifth spot in terms of funding amount. However, with 17 funding deals, it was the second-most active startup hub in June 2023.

The funding winter, which engulfed the Indian startup ecosystem last year, has had several knock-on effects. From increased investor scrutiny and falling valuations to layoffs, Indian startups have been hit hard by the funding crunch.

Despite this, investors continue to accumulate dry powder and a large part of the $18 Bn raised by them last year also remains unutilised. This should provide some solace to the cash-strapped startups as a resurgence in funding may be near.

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