TLDR:
- VCs are focusing more on unit economics as funding activity starts to pick up, signaling the end of the funding winter.
- Global macro events such as the conflict in Ukraine and rising inflation have made investors more cautious and focused on profitability.
Venture capital firm Tribe Capital reported that the total market capitalization of VC-backed Indian public companies crossed $50 billion in 2023.
However, the share of global VC investments into India dropped to 3.3% in 2023 from 5.5% in 2019, highlighting the challenges faced by Indian startups in attracting global investment.
The cautious environment has led to a decrease in deal velocity and an increase in the time it takes to seal a transaction.
Deal volumes reduced by about 56% in 2023 compared to 2021, and deal value dwindled to one-fifth of its 2021 peak.
Investors are now looking for startups that exhibit resilience and prioritize profitability.
There are green shoots emerging, particularly in the later-stage funding landscape, with startups like Lenskart, Udaan, Zepto, and GreyOrange raising substantial rounds in 2023.
However, investors are treading cautiously, even with record levels of deployable capital, and the ongoing market correction for startup valuations is expected to continue into 2024.
Founders remain optimistic about the potential of the Indian startup ecosystem, and the VC community envisions a turnaround in funding dynamics.
As start-ups navigate the challenges, investors are gearing up to provide support, signaling a comeback of prosperous times.
