Startup funding deals in India saw a 65 per cent dip in February 2023 from February 2022, as per the data shared by Venture Intelligence, a private market intelligence company.
The ecosystem recorded 42 funding deals this February, in comparison to 62 deals in January 2023 and 123 deals in February 2022. In terms of value, startups raised $536 million funding in February 2023 as compared to $4 billion raised in February 2022. In terms of sectors, enterprise tech or SaaS (software as a service) recorded the highest number of deals of 16 in February 2023 followed by 6 deals in AI/ML (deeptech) sector, 4 deals in fintech, 3 each in cleantech and ecommerce and 2 in healthtech.
“February 2022 was absolutely the peak and it was just before everything fell apart. We were seeing huge $300 million, $200 million funding rounds that month. So clearly funding winter is here and it looks like for a few more months, the comparisons will continue to look quite bleak,” said Arun Natrajan, founder of Venture Intelligence.
Further, the number of $100 million deals has also dropped significantly from 13 such mega deals being recorded in February 2022 to only one $100 million fundraise in February 2023. While the major impact has been on the late stage rounds (Series B and higher), deal volumes in early stage (Seed and Series A) have also taken a hit. 31 early stage deals were recorded in February 2023 as compared to 76 early stage deals in February 2022.
As the funding crunch intensifies, merger and acquisition activity in the startup ecosystem has also continued to stay strong. In the first two months of 2023, there have been 10 M&A deals in the Indian startup ecosystem. In terms of sector-wise impact, Natrajan noted that fintech and D2C e-commerce are expected to see quite a few strategic acquisitions. Majors like ITC and even roll up e-commerce companies are on the lookout for good brands to acquire. They are expected to be much more aggressive in terms of rolling up smaller brands in this environment as they will be able to acquire at better values now,” he added.