Startup Perspectives for H1 CY23 – A snapshot

● Stages of funding: Early-stage deals accounted for 57% of the total funding in H1 CY23 (in volume terms). In value terms, early-stage deals contributed to approximately 16% of the total funding in H1 CY23 but were at their lowest in H1 CY23 as compared to the previous two years. Growth- and late-stage funding deals accounted for 84% of the funding activity in H1 CY23 (in value terms). These represented 43% of the total count of deals in this period. The average ticket size in growth-stage deals was USD 19 million and late-stage deals were USD 52 million during H1 CY23.

● M&A transactions: While venture capital (VC) funding declined in H1 CY23, Mergers and acquisitions (M&A) transactions remained the same when compared to H2 CY22. 80 M&A deals involving start-ups were executed in H1 CY23. Of these, 80% were domestic transactions and the rest were cross-border transactions. Similar to the VC funding activity, SaaS (23), FinTech (11) and e-commerce and D2C (10) continue to witness the highest number of M&A transactions during H1 CY23.

● Sector-wise investment:

The top five invested sectors based on the funding received in the first half of the year

SaaS

D2C

FinTech

e-commerce B2B

Logi and AutoTech

These contribute to approximately 89% of the total funding received in H1 CY23 in value terms. In the same period, the D2C and Online gaming sectors each saw investments increase by almost 3 times that of H2 CY22. In the Foodtech sector, investments increased by four times in H1 CY23 compared to H2 CY22 in value terms.

● City-wise start-up funding:

The key start-up cities in India

Bengaluru

NCR

Mumbai

They represent around 83% of the total start-up funding activity in H1 CY23. A decline in funding activity was noted across all cities in H1 CY23 barring Chennai, which witnessed higher funding in the SaaS space.

Commenting on the current investment outlook for Indian startups, Amit Nawka, Partner – Deals & India Startups Leader, PwC India, said, “A funding winter is just a season in a startup’s journey. There is a slowdown in startup funding despite significant untapped capital reserves held by venture capitalists (VCs). Active VC firms in India have secured new funds in the past year and we can expect the pace of investments to pick up in the next few months. In the interim, there has been an increase in the due diligence being carried out by investors before making investments, both in terms of detailing as well as coverage – from typical finance and legal to areas like technology, HR and business processes – to ensure that the startups have a robust corporate governance framework.”