Sunday, February 25, 2024

India Venture Capital Report 2023

As we step into the new year, the Indian venture capital ecosystem remains vibrant and dynamic, with 2023 poised to be another exciting chapter in its growth story. How is India’s venture capital emerging? What is its scope? Get a comprehensive overview of India’s venture capital. Let us discover this in this article.

A Comprehensive Look at Fundraising in 2022 and 2023

The venture capital space has witnessed an upswing in growth in funding and fundraising. In the past five years, from 2018 to 2022, the cumulative annual growth rate (CAGR) for annual VC investments in India reached 31.24%. This growth reached its epic point in 2021, with investments in startups reaching as high as $38.5 billion (nearly 3,20,000 crores in the Indian rupee) in total annual investments.

During 2022, there was a surge in fundraising where investors raised their largest ever India-focused funds. Many of the top-tier investors like Peak XV and Lightspeed raised substantial funds e.g., Peak XV’s $2 billion India Fund VIII and Lightspeed India’s $500 million India/Southeast Asia fund. Domestic venture capitalists and smaller funds also experienced noteworthy fundraising, such as Fireside Ventures Fund III securing $225 million, Blume Ventures Fund IV with $250 million, and Artha Select raising $55 million for its micro-VC fund.

In 2022, six companies went public, with venture capitalists (VCs) selling their shares. Some of these companies include Five Star Business Finance (backed by Peak XV and Matrix), Delhivery (backed by SoftBank), and Tracxn (Peak XV, Accel, and Elevation). However, the total value from these initial public offerings (IPOs) was not as high as in 2021. Additionally, due to a global decline in tech stocks in 2022, many tech-focused companies decided to delay their plans to go public, impacting the overall value of exits in the market.

Leading Sectors in India VC Landscape

In 2022, consumer tech, fintech, and SaaS emerged as the top three sectors, securing 70% of total VC funding. This trend has persisted for five consecutive years, with consumer tech taking the lead in terms of value.

1.    Consumer tech:

encompassing areas like B2C, EdTech, online food delivery, health technology, and gaming, has been the top recipient of VC funding in India for the past five years. Despite a large and expanding consumer base with diverse needs, the sector experienced a funding decline from $23.5 billion in 2021 to $9.4 billion in 2022. This drop is attributed to the absence of mega-rounds and saturation in certain segments.

2.    The FinTech industry,

known for its resilience and innovation within the Indian VC scene, utilizes technology to offer financial inclusion, convenience, and efficiency to a wide audience. However, there was a decrease in funding, dropping from $5 billion in 2021 to $4.5 billion in 2022, primarily influenced by regulatory uncertainties and increased competition.

3.    Software as a Service (SaaS)

comprises horizontal business, vertical business, and enterprise tech sub-sectors. While the funding value remained steady at $4.1 billion in both 2021 and 2022, there was a rise in its significance from 11% to 16% during the same period.

Future Outlook of Venture Capital

The future of venture capital is promising, standing out as a top destination for startups and investors. With 50,000 active startups, 60 unicorns, and 150 soonicorns, the ecosystem is primed for growth and innovation. Government, corporate, accelerator, incubator, and mentorship initiatives provide robust support. Programs like SIDBI’s Fund of Funds, Startup India, IVCA, and Invest India play pivotal roles in nurturing and promoting Indian entrepreneurship, fostering a strong ecosystem.

The India Venture Capital Report 2023 paints a comprehensive picture of the evolving ecosystem. As investors, entrepreneurs, and stakeholders navigate the intricacies of the market, the report serves as a valuable guide, providing insights and foresight into what lies ahead for India’s dynamic venture capital landscape.

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