According to the investors, the early-stage investments are still happening, but the late-stage investments have slowed down. Things are expected to get better in 2024
Two years ago was a great time for Indian startups. But funding came to a standstill in the second half of 2022. With each passing month, the funding crisis in India appears to be getting starker. Despite the significant dry powder reserved for Indian startups, the ecosystem reported the lowest six-month funding trends in the last four years during H1CY23 (January–June) at $3.8 billion across 298 deals. According to the PwC India findings, this is a decline of nearly 36 percent as compared to H2 CY22 ($5.9 billion).
During the last few quarters, investors have supported startups that are showing good growth but have decided to stay away from inducting new investors due to adverse market conditions. However, there has been an increase in due diligence being carried out by investors before making investments, both in terms of detailing and coverage (from typical finance and legal to now covering technology, HR, and business processes). These are driven by the recent financial misreporting issues that have come to light and market conditions when investors are able to perform thorough due diligence to differentiate between startups and make more informed investment decisions, as the study highlighted.