Winter Continues: Indian Startup Funding Slumps 80% YoY In January 2023

The Indian startup funding landscape remained as desolate in January 2023 as it has been for the past seven months, with the funding raised by startups plunging 79.6% year-on-year (YoY) to $941 Mn from $4.6 Bn in January 2022.

Incidentally, Indian startup funding stood at around $900 Mn in January 2021 as well. It must be noted that 2021 was a path-breaking year for Indian startups in terms of funding, and that year’s momentum carried forward to 2022 as well, before fizzling out in April last year.

The deal count also saw a sharp decline in January 2023, with the number of funding deals falling 61% to 73 from 196 in the year-ago month.

However, the funding in January 2023 rose slightly compared to the preceding December 2022. The $941 Mn raised by Indian startups in January 2023 was about 8% higher than the $873 Mn raised in the last month of 2022.

Similarly, the number of funding deals rose over 4% in January 2023 compared to 73 deals in December 2022.

A big chunk of the funding raised in the first month of 2023 can be attributed to a single deal – PhonePe’s $350 Mn fundraise from General Atlantic as part of a larger $1 Bn funding round. KeditBee’s $100 Mn funding round was the only other mega deal during the month.

Together, the two funding deals accounted for 47.8% of the total amount raised last month, with the remaining 71 deals accounting for 52.2%.

The PhonePe and KeditBee mega rounds also ensured that fintech finished in the pole position in January 2023. Fintech startups raised the highest amount of $569 Mn across 14 deals during the month, followed by the enterprisetech and deeptech sectors. 

While fintech and ecommerce were tied in terms of the highest number of deals (14 each), the enterprisetech sector saw 12 funding deals in January 2023. These were the only three startup segments with double-digit funding deals in January 2023.

In terms of top startup hubs, Bengaluru strengthened its position, with startups based out of Karnataka’s capital raising $605 Mn across 24 deals in the first month of 2023. Delhi NCR and Mumbai occupied the second and third positions, having raised $166 Mn in 19 deals and $92 Mn in 9 deals, respectively.

Meanwhile, funding across stages recorded a YoY fall during the month. Growth-stage startup funding was the worst hit, with such startups raising only about $159 Mn last month, down 87% compared to January 2022’s $1.32 Bn.

Late-stage funding fell 79% to $611 Mn in January 2023 from $2.97 Bn in January 2022, while seed funding also declined 61% to $104 Mn from $219.3 Mn in the year-ago month.

The funding slowdown since last year has resulted in many startups firing employees as they look to cut costs and extend their runway.

Last month, 21 startups laid off 3,083 employees, while the total number of employees fired since the start of 2022 neared the 22,000 mark, per Inc42’s ‘Indian Startup Layoff Tracker’.