Indian startup investment has plunged by nearly two-thirds in just 12 months

India has established itself as a noteworthy startup hub in the Asia-Pacific (APAC), attracting considerable venture capital (VC) funding. 

It’s among the top four markets globally, alongside the US, the UK, and China. 

In 2022, India accounted for 5.1% and 6.3% of global VC funding value and volume, respectively.

Nevertheless, investor confidence has taken a hit in the new year, leading to a decrease in VC funding activity. 

Data analytics company GlobalData reported a sharp month-on-month (MoM) drop of 23.1% in VC funding.

GlobalData’s Financial Deals Database analysis shows that in January 2023, India announced 87 VC deals worth US$696.2 million.

This is a decline of 13.9% in volume and 23.1% in value compared to December 2022, when 101 VC deals worth US$905 million were announced.

GlobalData’s lead analyst, Aurojyoti Bose, said that July was the first month of 2022 that saw a decrease in the total VC funding raised by Indian startups below $1 billion due to funding winter affecting deal activity. 

“As investor cautiousness continues to prevail in 2023 as well, the first month of the year also saw the total VC funding below $1 billion,” she said. 

Compared to January 2022, the decrease in VC funding deals in India was even more significant – a steep decline of 62.5% in January 2023. 

The total value of these deals also dropped significantly by 80.3%. 

Bose said that several factors are in play for the dent in investor sentiments, and the noteworthy among them are macroeconomic challenges, recession fears, and concerns around startup valuations.

“The decrease in venture capital investment can also be attributed to the lack of companies that can generate significant returns for investors. This is a common challenge for emerging economies, and India is no exception.”