A recent report reveals a substantial downturn in investments by private equity (PE) and venture capital (VC) funds in homegrown companies within India this year. As of December 20, the total investment stood at $27.9 billion across 697 transactions, a marked decrease from the robust $47.62 billion across 1,364 deals recorded in 2022.
Simultaneously, data sourced from Venture Intelligence and industry body IVCA highlights an increased outflow of funds from the country by private equity players. Overall exits in 2023 reached $19.34 billion from 248 companies, surpassing the figures of 2022, which tallied 233 exits amounting to $18.45 billion.
The decline in venture capital funding for startups is notably staggering, plummeting by 72 per cent compared to the previous year. As of December 15, new-age companies in India secured $7.5 billion across all stages, a stark contrast to the $25 billion received in the previous year.
This year’s funding slump predominantly attributes to a sluggishness in late-stage deals (Series D and above), which decreased significantly from $11.70 billion in 2022 to $3.5 billion this year.
Early-stage funding deals faced a similar fate, dwindling nearly by half, with 414 rounds recorded compared to 871 rounds in the previous year.
Moreover, growth-stage funding rounds witnessed a substantial drop, amounting to $1.9 billion through 99 deals, a notable decline from $6.84 billion garnered through 230 deals in 2022.
This economic shift has had a tangible impact on India’s startup growth trajectory, resulting in the country slipping to the fourth position in global rankings for the highest-funded geographies in 2023. With only $7 billion in total funding as of December 5, India witnessed its lowest funding in five years, relinquishing its earlier third-place standing to trail behind the US, the UK, and China.
The downturn was particularly evident in the third quarter (Q3) of this year, where India dropped to the fifth position among the highest-funded countries, falling behind the US, the UK, China, and France, marking a challenging year for India’s investment ecosystem.
