New Delhi [India], Venture capital (VC) and private equity (PE) funding in India is set to decline from US$62 billion in 2022 to US$38 billion in 2023, reflecting global caution on risk capital, Bain & A joint report by Capital and ICVA noted. VC investment in India has declined to 0.4x in 2022, compared to 0.6x globally.
But, despite the decline in deals and fund flows, India has retained its position as the second largest destination for VC and growth funding in the Asia-Pacific region. However, the fund flow share has come down from 20 per cent to 12 per cent in 2022-23. Interestingly, Japan and China have made gains in fund flows.But the report also highlights that, with growth prospects in consumer tech, fin-tech and SaaS-based companies, these sectors are set to attract nearly 60 per cent of total funding in 2023 and become key sectors.
However, in 2023, investors focused more on traditional industries (e.g., BFSI, healthcare) and emerging domains like electric mobility, generative AI. The financing outlook this year faced challenges from inflation, high interest rates and global economic uncertainties.
The funding winter caused a sharp decline in both the number and size of deals, from 1,611 to 880 deals and the average deal size dropped from US$16 million to US$11 million. Mega-round funding for Indian companies has declined by nearly 70 percent.However, smaller-sized deals of less than US$50 million saw a less severe decline of about 45 percent, reflecting long-term investor optimism.
The report also said that many startups postponed fundraising, which halted the emergence of unicorns and allowed them to return to pre-2019 levels.
While technology sectors such as consumer tech, fin-tech and SaaS remained prominent, their funding share declined as investors shifted towards traditional sectors such as banking, health care and emerging sectors such as electric mobility and generator AI.
Consumer technology investment to decline from US$9.3 billion to US$2.4 billion in 2022-23. Fintech investment also witnessed a subdued initial phase, falling by about 0.5x from 2022 levels.However, the report said investment in generic AI is expected to increase from US$15 million to around US$250 million in 2022-23.
But, despite the decline in deals and fund flows, India has retained its position as the second largest destination for VC and growth funding in the Asia-Pacific region. However, the fund flow share has come down from 20 per cent to 12 per cent in 2022-23. Interestingly, Japan and China have made gains in fund flows.But the report also highlights that, with growth prospects in consumer tech, fin-tech and SaaS-based companies, these sectors are set to attract nearly 60 per cent of total funding in 2023 and become key sectors.
However, in 2023, investors focused more on traditional industries (e.g., BFSI, healthcare) and emerging domains like electric mobility, generative AI. The financing outlook this year faced challenges from inflation, high interest rates and global economic uncertainties.
The funding winter caused a sharp decline in both the number and size of deals, from 1,611 to 880 deals and the average deal size dropped from US$16 million to US$11 million. Mega-round funding for Indian companies has declined by nearly 70 percent.However, smaller-sized deals of less than US$50 million saw a less severe decline of about 45 percent, reflecting long-term investor optimism.
The report also said that many startups postponed fundraising, which halted the emergence of unicorns and allowed them to return to pre-2019 levels.
While technology sectors such as consumer tech, fin-tech and SaaS remained prominent, their funding share declined as investors shifted towards traditional sectors such as banking, health care and emerging sectors such as electric mobility and generator AI.
Consumer technology investment to decline from US$9.3 billion to US$2.4 billion in 2022-23. Fintech investment also witnessed a subdued initial phase, falling by about 0.5x from 2022 levels.However, the report said investment in generic AI is expected to increase from US$15 million to around US$250 million in 2022-23.
