Is funding winter over? VCs & PEs invested $33.3 bn in Indian start-ups in H1FY23

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According to a report by Software Technology Parks of India (STPI), venture capital and private equity funds infused around $33.3 billion in the first half of FY23. This investment happened in 1,076 deals in India.

In addition, investments in cities beyond Tier I stood at $14.5 billion across 238 deals. The report found that the top sectors that performed well in Tier II, III and IV cities included enterprise tech, retail tech and health tech.

India has the third largest ecosystem of start-ups after the US and China. The number of start-ups registered with the Department for Promotion of Industry and Internal Trade has increased by 133 per cent in the last six years from just 471 in 2016 to 75,442 in 2022.

After two and a half years of the COVID-19 pandemic, the money invested in the first two quarters of FY2020 has reached an all-time low. As compared to the year-ago period, according to data shared by Trackxn.

The number of funding rounds also decreased by 57 percent compared to the year-ago period. There has been a 15 per cent drop in funding on a month-on-month basis as compared to August 2022.

not all gloom and doom

But the overall scenario is not entirely gloom and doom. Though still down 69 per cent year-on-year, start-up funding in India saw its first pick-up of the year in October after nine months of decline. Indian start-ups raised $1.08 billion in capital, up 39 per cent as compared to September 2022, showed data shared by Traxon.

Even though late-funded start-ups are taking measures to cut expenses and become profitable due to lack of funds, the scenario is different when it comes to the early stage.

In a conversation with Business Today, Rajeev Srivatsa, Partner, Antler, said that they have been investing more in early stage startups in the last 3-4 months than ever before. The ticket size of investments has also increased from Rs 200k to Rs 300k on an average. “Early-stage funding has not been affected at all,” he said, adding that the ecosystem has now improved. “Serious people are becoming founders, valuations have stabilized and expectations are now reasonable.”

Srivatsa also says that the biggest change he has seen is that investors are now spending more time with their founders. There’s no “hype” about closing deals quickly and the spotlight is on “building a relationship with the founder,” especially “if you’ve been in the early stage for at least 10 years.”

Read also: BYJU’S, Ola, Paytm, OYO: Investors bet the most on these startups

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