Fund flow to Indian startups in the first half of this year fell 36 percent to $3.8 billion across 298 deals from $5.9 billion in the second half of 2022, a latest report shows. This is the lowest six-month funding in the last four years. Experts point out that the Indian startup ecosystem is witnessing slowdown despite VCs holding significant capital reserves. Investors are also carrying out more due diligence these days, adds the PwC India report.

It is pointed out that Bengaluru, Delhi-NCR, and Mumbai have continued to remain the top three cities in terms of startup funding, and they represent 83 percent of the total startup funding in H1. It is also not surprising that the most funded startup sectors are Fintech, Software-as-a-Service and direct-2-consumer. The average ticket size of growth and late-stage deals, which account for 84 percent of total funding, are $19 million and $52 million, respectively.

Another report points out to the same concern. The report, prepared by Tracxn, a SaaS-based market intelligence platform, finds Indian startups mirroring the global declining trend in funding, with total funding in first half of 2023 falling 24 percent to $5.5 billion from $7.3 billion in H2 2022 and a staggering 72 percent from $19.7 billion in H1 2022. Interestingly, the report states that more and more startups are being formed in Tier 2 and Tier 3 cities.

It is, however, noteworthy that India – one of the fastest-growing economies in the world – still ranks among the top three funded geographies globally. Experts point out that the Indian startup sector is currently facing funding crunch due to inflation and other macroeconomic factors, and there is huge growth potential in terms of startup funding. But it seems close monitoring of the situation is necessary now to prevent any further deterioration.