The July-September quarter of 2023 (Q3 2023) saw a significant drop in funding, with a total of $1.5 billion raised, marking a 29% decrease from the previous quarter and a staggering 54% decline compared to the same period last year, according to market intelligence platform Tracxn's latest Geo Quarterly Report India Tech- Q3 2023.
Late-stage rounds saw a 33% reduction, while early-stage and seed-stage funding plummeted by 74% and 75%, respectively, compared to the same quarter the previous year.
Besides, the July-September quarter also saw the creation of two unicorns -- Zepto and Zyber 365, though it represents a 50% decline compared to the previous year.
Total 33 acquisitions were done during the quarter, a 13% drop YoY, with notable ones including Route Mobile's acquisition by Proximus Group for $718 million and Marico Limited's acquisition of Plix for $45.1 million.
In the said period, only five funding rounds exceeded $100 million, including companies such as Perfios, Zepto, Ola Electric, Ather Energy, and Zyber 365, with Perfios topping at $229 million.
Notably, after an increase in funding in Q4 2022, the India tech space has seen a "decline" in funding every quarter, with a 3rd consecutive drop in funding in Q3 2023, making it the "least funded quarter" in 2023 and also the "least funded quarter in the last five years".
However, according to the report, India continues to hold its ground as a "prominent player" in the global tech funding landscape. Neha Singh, co-founder, Tracxn says despite facing the challenges of a funding winter, India ranks as the "fifth highest funded country" in Q3 2023 and maintains its fourth-place position in terms of total funding for the year-to-date.
"It underscores the resilience of India's tech startups and their ability to adapt to changing market conditions," says Singh. Abhishek Goyal, co-founder, Tracxn, says despite the decline in funding, India's tech ecosystems remain top-performing globally.
Enterprise applications, fintech, and transportation and logistics tech were the top-performing sectors in Q3 2023, as per the data. Enterprise applications funding rose by 51% compared to the previous quarter, fintech received $436 million in funding, marking a 68% growth, and transportation and logistics tech garnered $375 million, showing a drop of 72%.
The investment growth in the fintech sector can be attributed to the rapid growth seen in the adoption of UPI, both in the domestic market and international markets like Bhutan, France, UAE, Saudi Arabia, Bahrain, and Singapore. Notably, over 10 billion monthly UPI transactions were reported in August as per reports from NPCI and digital payments.
Bengaluru emerged as the leader in total funds raised during the period, followed closely by Mumbai and Noida. Top investors in Q3 2023 included Accel, Blume, and Peak XV Partners. IPV, 100X.VC and Titan Capital led the seed investments, while Elevation, Tiger Global Management, and Accel were prominent in early-stage investments. In the late-stage category, Glade Brook Capital took the lead.
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