VC funding in Sept rises 116%, sees only 5% YoY decline

September 2023 turned out to be very positive for the Indian startup ecosystem with venture capital (VC) funding almost doubling as compared to August and a marginal decline to the same period last year.

This development comes after month-on-month VC funding dropped to its lowest ever for 2023 in August at $396 million.

This month, VCs invested $857 million in Indian startups cutting across 83 deals—a 116% month-on-month rise. However, in September 2022, the VC funding amount stood at $905 million—a decline of just 5.3%, as per YourStory Data.

However, it must be noted that ever since June, the monthly VC funding amount has been consistently below $1 billion. The funding figure, $1 billion, is an important benchmark, as crossing it showcases the strength of the startup ecosystem. Going by the trends, it is likely that the total funding for 2023 may just touch 50% of what was achieved in 2022, where the figure was $24 billion.

This month, Perfios, which raised $229 million, bagged the highest funded transaction. This was followed by electric vehicle maker Ola Electric at $140 million, and Ather Energy at $108 million.

A big positive was that the startup ecosystem saw three deals worth over $100 million transaction value—a rarity given the present environment of a funding winter.

At present, most of the large-value transactions fall in the range of $30-60 million, such as Leads Connect ($60 million) and Third Wave Coffee and Doceree ($35 million each).

In terms of funding stages, the late category received the highest amount at $520 million, followed by the growth stage at $267 million. The highest number of deals were seen in the early stage at 61, but the value stood at just $67 million.

The trend noticed during the entire year was the heightened activity in the early stage funding, including in pre-seed, seed, pre-Series A, and Series A rounds. According to industry observers, VC firms would not like to miss out on any bets that may generate good returns over the next two to three years, where it is expected that the funding tide would turn for the better.

Additionally, startup valuations are also at reasonable levels with no unrealistic expectations from both investors and founders.

September also saw the fintech and EV categories generating great interest among investors, bagging the highest funding amount.

In terms of the cities receiving the highest funding amount during September, Bengaluru topped the list at $575 million, followed by the Delhi-NCR region ($139 million), and Mumbai ($118 million). While this has been a constant trend, on certain occasions, Chennai also ranks among the top three.

Given the funding trends till now, the Indian startup ecosystem hopes to see 2023 pass off early and expects 2024 to be a much better period.