India’s startup landscape: Funding winter continues as investment plummets

Today, India is known globally for its vibrant startup ecosystem, which is the world’s third largest. But like the rest of the world, the country’s startups have been grappling with a ‘funding winter’. Only two startups attained unicorn status — a valuation of $1 billion – last year.

A new report brings out the continuing downward trend in funding, as investors remain more cautious and selective, even as India remained the fourth largest venture market in the world in 2023.

Some highlights

• Venture capital investments shrank more sharply in India, dropping to $11 billion in 2023 — one-fourth of the $42 billion figure in 2021.
• Indian venture funding in startups has dropped to pre-2017 levels, with both the total value of deals as well as the number of deals having dropped by over 60 per cent.
• The drop is steeper for late-stage funding, which shrank by 82 per cent since 2021. Seed funding has also halved.
• At the seed stage, both deal count and funding are going down.
• The unicorn is dying — the number of startups that attained unicorn status dropped from 45 two years ago to just two in 2023. The unicorn versus IPO count has reversed, with little late-stage funding coming in, startups are looking to go IPO early.
• 2021’s leading late stage investors are now holding back.