India's start-up ecosystem witnessed a significant decline in investments during the first quarter of 2023, according to the "Tracxn Geo Quarterly Report: India Tech - Q1 2023." The report revealed that Indian start-ups raised a total of $2.8 billion during Q1CY23, a 75 per cent decline from the $11.9 billion raised during the same period in 2022. The decline in funding was attributed to the rise in interest rates and inflation that significantly impacted investments.
The report also showed a considerable decline in late-stage funding, which fell by 79 per cent ($1.8 billion) in Q1CY23 compared to Q1CY22. Early-stage funding also decreased by 68 per cent ($844 million) during the same period. However, there was a 54 per cent increase in early-stage funding from $777 million in February 2023 to $1.2 billion in March 2023, providing some optimism to India's start-up ecosystem.
Nine businesses, including PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome foods, TI Clean Mobility and KreditBee, raised significant funds during Q1CY23. PhonePe raised a total of $650 million during several Series D rounds, which gave the business a valuation of $12 billion. Lenskart, on the other hand, was valued at $4.5 billion and raised $500 million in a Series J transaction led by a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA).
The three industries that received the most funding during Q1CY23 were Finance, Retail, and Enterprise Applications. Although funding for the FinTech sector increased by 150 per cent from Q4CY22 to Q1CY22, it decreased by 51 per cent from Q4CY22 to Q1CY23. Additionally, no new Indian unicorns emerged during Q1CY23, unlike Q1CY22, which saw 14 unicorns arise.
Bangalore led all other cities in total funds raised, followed by Delhi and Mumbai. The top investors overall were 100X.VC, CIE IIITH, and IPV, followed by Accel, Sequoia Capital and Alteria Capital for early-stage investments, and Premji Invest, Elevation and Chiratae Ventures for late-stage investments. The top seed investors were 100X.VC, CIE IIITH and IPV.
During Q1CY23, three businesses, including Robu Labs, Mars Capital and Homesfy, went public. Meanwhile, the number of acquisitions remained consistent with 46 in Q1CY23 compared to 43 in Q4CY22. Squared Capital purchased Gram Power, a company that provides energy management solutions, for $100 million, while Geniee purchased Adpushup, a company that offers ad optimization solutions, for $70 million.