BENGALURU: Indian start-up ecosystem faced multiple challenges including funding winter and layoffs in 2023 amid a tough macroeconomic environment. As per data sourced from Tracxn, start-ups managed to raise only $8.1 billion compared to nearly $25.2 billion in 2022. However, in December alone, start-ups managed to raise close to $860 million. Only two start-ups, Zepto and InCred, turned unicorns this year as against 24 in 2022 and 43 in 2021.
Sanjoy Paul, program director, technology at Hero Vired, said, “In 2023, the global start-up ecosystem faced unprecedented challenges as funding reached an all-time low. Diverse regions grappled with distinct issues, leading to constraints on fund availability and rollout. The downturn in financial support significantly impacted entrepreneurial ventures worldwide. Despite a sharp fall in funding, India ranked as the fourth-highest funded nation globally in 2023.”
Also, this year saw over 16,000 layoffs in India, with Byju’s laying off over 3,500 employees and Paytm firing 1,000 employees. Somdutta Singh, Serial Entrepreneur, founder and CEO Assiduus Global, said start-up funding in India has reached its lowest point in five years, emphasising need for strategic pivoting and a renewed focus on resilience, sustainability, and operational efficiency.
Seed-stage funding has experienced a major downturn, falling 60% to $678 million in 2023, as against $1.7 billion during the same period in 2022. “This calls for a shift in approach for companies, urging them to optimise cloud resources for cost-effectiveness and adopt leaner models,” he said. As an investor, he added that the prevailing sentiment among investors or VCs underscores a shift from prioritising unchecked growth to emphasising operational cash flows, aligning with a cloud-centric strategy that emphasises scalable solutions to alleviate financial pressures.
Ashish Sharma, Managing Partner, InnoVen Capital, said, the funding environment has been weak over last 18 months,and it is expected that it will remain sluggish as we get into 2024. “Only after we start seeing a reversal in some of the macro headwinds, like global inflation coming down and US Fed lowering interest rates as well as an improved geopolitical situation, can one expect a gradual improvement in the funding environment. From an Indian standpoint, we also need to keep an eye on the general elections as well as the state of the overall economy,” he added.