India's share of venture capital funding lowest in 5 years

India’s share of total global venture capital (VC) funding fell to 2.9 per cent in calendar year 2023 (CY23) — the lowest since CY19 — reaching $7.3 billion as most startups struggled to raise money without compromising on their earlier valuations.

Based on global data by CB Insights on VC funding, funding to Indian startups fell by nearly a third compared to CY22 when it hit $20.6 billion and accounted for 4.8 per cent of the global figure.

While the data shows that the world had 71 new unicorns (21 in Asia), India contributed only two of them, as compared with CY22 when it had 22.

India’s share of total deals also saw a fall, accounting for only 3.6 per cent of all the global deals in CY23, as compared to 4.2 per cent in CY22.

In Q4 2023, India had one deal which was in the list of top 10 global deals: The Udaan fund raiser at $340 million, albeit at a lower valuation.

The funding pattern has also changed. In CY23, the share of late-stage funding accounted for 9 per cent of the money, down from 12 per cent in the previous year.

The share of mid-stage funding also fell by 2 percentage points but went up for early stage funding by 3 percentage points, from 75 per cent in CY22 to 78 per cent in CY23.

Late stage startups have found it difficult to raise funds without reducing their valuations.

Or they were told to come back only when they became profitable.

Most VCs concentrated on funding smaller startups with lower risks.

Despite all the turbulence in its economy, China did much better than India.

It managed VC funding of $27.4 billion in CY23 though it too saw a sharp fall.

The $27.4 billion figure was a fourth lower than the figure in CY22 when China crossed $100 billion.

As a result, the gap between the countries in funding share has narrowed.

The fall in China and India has also pulled down funding which has come to the Asian region.

This has fallen by half from $105.7 billion in CY22 to only $53.4 billion in CY23.

At a global level too, it is clear that funding for startups has dried up.

It fell to $426 billion in CY23 from $426 billion in CY22.

Even though the US was able to garner VC funding of $132 billion in CY23, this was a slight drop from the $132.4 billion the previous year.