Amidst layoffs and global macroeconomic headwinds, domestic start-ups raised $2.8 billion in 301 rounds in the January to March period in 2023, according to the latest funding report by Tracxn. This is a decline of more than 75% year-on-year (YoY) as compared to $11.98 billion raised by domestic start-ups in 816 rounds in the same period last year. On a sequential basis, the domestic startup funding declined by 21% as against $3.7 billion raised in 347 funding rounds in Q4 of 2022. The report attributes soaring inflation and the hike in interest rates by central banks globally to be the major reasons for the decline in startup funding.

The late-stage rounds in Q1 of 2023 saw a decline of 79% to $1.8 billion, as compared to $8.8 bn in the same period last year. On a sequential basis, the late-stage funding witnessed a decline of 23% (QoQ) as against $2.6 billion in Q4 of 2022.

The early stage rounds in Q1 of 2023 witnessed funding of $844 million with a drop of 68% as compared to $2.6 billion in the same period last year. On a sequential basis, the early-stage funding witnessed a decline of 4% QoQ as against $876 million in October to December period in 2022.

The seed stage rounds in Q1 2023 saw funding of $153 million, a drop of 16% QoQ as against $182 million in Q4 of 2022. In Q1 of 2022, the seed funding stood at $546 million.

The month-on-month funding in IndiaTech Startup Ecosystem has seen a significant uptick of 54% from $777M in February 2023 to $1.2B in March 2023.

The Q1 of 2023 has witnessed nine funding rounds where more than $100 million were raised led by PhonePe, Lenskart, Mintify, Insurance Dekho, FreshtoHome foods, TI Clean Mobility and KreditBee. PhonePe raised a total of $650 million in multiple Series D rounds in Q1 of 2023, valuing the company at $12 billion. Lenskart raised $500 million in the Series J round led by a wholly-owned subsidiary of Abu Dhabi Investment Authority (ADIA) at a valuation of $4.5 billion.

Amongst sectors, fintech, retail and enterprise applications were the top-performing sectors in Q1 of FY23. In Q1 of 2023, FinTech segment witnessed a funding growth of 150% compared to Q4 of 2022. However, this is a drop of 51% compared to Q1 of 2022.

"The regulatory authorities have started to be vigilant on the malpractices in the FinTech domain evident from the cancellation of licenses of various NBFCs. This will ensure a safe consumer experience and benefit the FinTech sector as a whole," the report says.

There were no new unicorns created in Q1 of 2023, compared with 14 unicorns in Q1 of 2022. The Q1 of 2023 witnessed 46 acquisitions, compared with 43 acquisitions in Q4 of 2022, and 92 acquisitions in Q1 of 2022. Robu Labs, Mars Capital, and Homesfy are the three startups that became IPOs in the first quarter of 2023. Bangalore led the total funds raised in this quarter followed by Delhi and Mumbai. In Q1 of 2023, 100X,VC, CIE IIITH, and Accel were the top investors. India was the second-highest funded geography after the US. In terms of quarterly funding, India was the second-highest funded geography in Q1 and Q2 2022. It fell to fourth place in Q3 and Q4 2022.

Startup Funding in Q1 2023

Startup funding declines 75% to $2.8 bn in Q1 2023: Tracxn