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Tracxn Releases Its Annual India Start-Up Report: 2023 Sees The Lowest Funding In Five Years

Funding in India's tech start-up ecosystem in 2023 has been the lowest in the last five years, with a total of $7 billion received, dropping India's global ranking from 4th to 5th place

Tracxn Releases Its Annual India Start-Up Report: 2023 Sees The Lowest Funding In Five Years

Outlook Start-Up Desk

POSTED ON December 09, 2023 12:10 PM

Tracxn, a leading global market intelligence platform, today released its ‘Tracxn Geo Annual Report: India Tech 2023.’ The report is the company's annual exclusive report, offering an in-depth overview of the Indian start-up ecosystem, including funding activities, investor exits through acquisitions and IPOs, and wider trends in the fundraising landscape.

The report states that the Indian tech start-up ecosystem has witnessed a significant funding decline of 72 per cent in 2023, compared to $25 billion in the previous year, making it the lowest-funded year in the last five years. With a total funding of $7 billion received so far this year, India has dropped from 4th place in 2022 and 2021 to 5th place among the highest-funded geographies globally in 2023. The last quarter (Q4) recorded the lowest funding of $957 million to date, marking it the lowest-funded quarter since Q3 2016. 

The decline is primarily due to the biggest drop in late-stage funding, by over 73 per cent to $4.2 billion in 2023 from $15.6 billion in 2022.  The number of $100 million+ rounds recorded were only 17, dropping by 69 per cent compared to last year. FinTech, driven by increasing smartphone penetration and government initiatives towards a cashless economy, has received $2.1 billion in funding so far in 2023, a decrease from $5.8 billion from the same period last year. PhonePe, a leading payments company, stands out as the top-funded company in the sector, securing a total of $750 million in four Series D rounds which makes up for 38 per cent of the funding received by the sector. Perfios, Insurancedekho, and Kreditbee, are some of the other top-funded companies in the sector this year. 

The Retail sector has received $1.9 billion in funding, marking a 67 per cent drop compared to 2022. Lenskart, with $600 million raised in two Series J rounds, emerges as the top-funded company in the sector this year. 

Enterprise Applications, the third-highest funded sector in 2023, has experienced a significant decrease of 78 per cent compared to the previous year, securing $1.56 billion in funding. 

Despite the overall funding slowdown, sectors such as Environment Tech and SpaceTech have garnered investor attention. Environment Tech received $1.2 billion in funding, while SpaceTech saw a 6 per cent increase with $122 million raised so far in 2023 brought about its privatization by the government.

Other aspects highlighted in the report include only two new unicorns created; Incred and Zepto as against 23 in the previous year and 119 acquisitions as compared to 187 acquisitions in 2022, a 36 per cent drop. Route Mobile, Arcion and Gram Power were some of the major acquisitions in 2023. However, IPO numbers did not see a major drop this year with 18 tech companies going public in 2023 till date as compared to 19 in 2022. Ideaforge, Yatra and IKIO Lighting are some of the notable tech IPOs of 2023.

Bengaluru, Mumbai, and Delhi-NCR continue to attract significant funding in India's tech start-up ecosystem with LetsVenture, Accel, and Blume Ventures, being the top investors supporting the growth of the India Tech space. 

Commenting on the report insights, Neha Singh, co-founder, Tracxn said, "While the funding slowdown in 2023 presents challenges for the Indian tech start-up ecosystem, we remain optimistic about the future. With favourable government policies and a fast-growing economy, we believe India is well-positioned for success in the years to come. Our focus remains on innovation and creating value, and we are confident that the industry will rebound and flourish."

This decline in funding comes at a time when India's economy is expected to grow at a 6.3 per cent annual rate in 2023–24, with further growth anticipated in the upcoming fiscal year. Despite the funding slowdown, the government remains committed to promoting the tech ecosystem in the country. Multiple schemes and initiatives have been introduced, including tax concessions for start-ups, custom duty exemptions for EV-related capital goods and machinery, and the Drone Shakti Program, among others. These initiatives aim to support the growth of India's start-up ecosystem, fueled by its status as one of the fastest-growing major economies in the world.