Tech startups see mixed investor sentiment in January

Tech funding sentiment for homegrown startups remained largely muted through January, as concerns regarding inflation, uncertainties due to geopolitical tensions, and other domestic factors saw funding for tech startups remain mostly flat through last month. According to data from statistics tracker Tracxn Technologies’ India Tech Monthly Funding Report, January 2023 published on Tuesday, January saw tech startups raise $962 million — up 3% sequentially from $935 million last month.

However, the total number of funding rounds among tech startups during the period dropped 22% sequentially to 84 rounds during January this year — from 108 rounds in December.

Late stage funding rounds, which refer to Series B and beyond among startups, largely drove the slim growth seen in January. According to Tracxn, the latter rose by 16% sequentially to $688 million in January. However, seed funding rounds dropped 9% sequentially to $56 million, and early-stage rounds dropped 30% to $199 million, during the period — thus keeping the overall funding sentiments mostly flat through the period.

To be sure, late-stage funding rounds have always accounted for the lion’s share of the overall investment corpus. Tracxn’s 2022 annual tech funding report published last month revealed that overall tech funding during 2022 fell 34% year-on-year (YoY) to $35.6 billion — down from $53.6 billion in 2021. The drop was largely led by a 45% YoY fall in late-stage startup funding, which fell to $23.9 billion last year, from $16.1 billion in 2021.

According to Tracxn, factors such as financial irregularities in startups such as automobile servicing company GoMechanic, coupled with the steep fall in stocks of Adani Group, have acted as deterrents to investor confidence in India’s tech startups — and could continue to do so in the coming months.

The January period also saw two $100 million-plus funding rounds, with fintech platform PhonePe raising $350 million in Series D funding, and online personal loan marketplace KreditBee raising $120 million in Series D as well. Fintech, incidentally, was among the largest growing sectors for investments during January, with total funding in fintech startups rising 144% sequentially to $637 million.

To be sure, both the top funding rounds during January were in the fintech sector. Agri-tech startups, however, saw a massive drop in funding during January — with funding falling 82% sequentially to $56.8 million, down from $319 million a month ago.

Tracxn also noted that January saw no new unicorns or public listings of startups.

The lack of unicorns at the start of the year is in line with what industry analysts expect. On January 17, Neha Singh, chief executive of Tracxn, told VCCircle that this year could see fewer unicorns in India than the past years, driven by global uncertainties and concerns.

January also proved to be a lean phase for startups in the country. On January 18, Mint reported that over 11 startups fired more than 1,400 employees, led by social media platform ShareChat’s parent firm Mohalla Tech laying off 20% of its staff, or 600 employees, and hyperlocal delivery services firm Dunzo cutting its workforce by 3%, or 90 employees.