Funding winter persists: Indian start-ups suffer in 2023's first half
The funding winter that arrived last year in India is still here. It has only become worse over the past few months. In the first seven months of 2023, start-up funding in the country fell by 77% compared to the same period last year. According to Venture Intelligence, start-ups received $4.4 billion in PE/VC funding compared to $19.3 billion a year ago.
Why does this story matter?
Start-up funding worries have been hogging the headlines for a while. Multiple Indian start-ups have been struggling due to a lack of funding. The funding squeeze can be attributed to tightening monetary policies, rising inflation, falling tech stocks, and a fear of recession. It needs to be seen how India's start-up ecosystem recovers from the situation.
Funding rounds are down from 821 to 344
From January-July 2023, Indian start-ups secured only 344 funding deals. During the same period last year, 821 deals were done. In July alone, funding fell by 80% from $2.6 billion to $523 million. There were only 42 funding rounds in the month. It is 45% lesser than the number of deals start-ups secured in July 2022.
Start-ups in every stage are affected by funding crunch
The funding crunch has affected early-stage and growth and late-stage start-ups. Early-stage deals fell from 422 in 2022 to 198 in 2023. Funding saw a 59% decline from $1.8 billion to $722 million. Growth and late-stage deals decreased from 272 in 2022 to 146 in 2023. Start-ups in this stage secured $3.7 billion in funding in 2023 compared to $12.4 billion last year.
Over 17,000 start-up employees were fired in H1 2023
Funding crunch is often reflected in terms of cost cuts. Indian start-ups have also resorted to reducing their costs. Layoffs have emerged as the 'most-efficient' way of cutting costs. In the first half of this year, around 70 start-ups fired over 17,000 employees, per data from CIEL HR. Start-ups, including BYJU'S, Swiggy, and Unacademy, have taken the layoff route this year.
Funding winter is here to stay
Funding winter is here to stay. There are no signs of improvement in the situation. Start-ups that depend on external investments have been affected the most by the funding crunch. With many market watchers and VCs warning about the overestimation of India's internet market, investors will be reluctant to part with their money. Attaining profitability is the way forward for many start-ups.
