According to ‘Indian Tech Startup Funding Report Q1 2023’, Indian startups raised a total of $3 Bn in Q1 2023 as compared to $12 Bn in Q1 2022, showing a 75% YoY decline. The number of deals also fell 58% YoY to 213 during the same period. Investors are reportedly apprehensive due to the ongoing Russia-Ukraine war, the falling rupee, the Silicon Valley Bank collapse, and macroeconomic uncertainties, among other things. The report also notes that the funding patterns are returning to the pre-pandemic levels after the bull run of 2021. The report further points out that the late-stage funding recorded a YoY decline of 77%, with startups raising only $1.8 Bn against $7.8 Bn in Q1 2022, and the growth stage funding amount dropped 76% in Q1 2023, with startups raising $700 Mn against $2.9 Bn in Q1 2022. Seed funding also declined by 81% to $180 Mn in Q1 2023 from $961 Mn in Q1 2022.
It seems that the M&A deal count in India has not been able to maintain its momentum, with a 65% decline in the first quarter of 2023 compared to the previous quarter’s all-time high. This suggests that the M&A activity in India may be facing some challenges.
Furthermore, distressed deals such as the acquisition of GoMechanic and pushed-back deals such as PhonePe’s acquisition of ZestMone may also indicate that there are some obstacles preventing M&A deals from going through smoothly. Possible reasons for the slowdown in M&A activity could include economic and political uncertainty, regulatory hurdles, and difficulties in obtaining financing. It’s important to note that M&A activity is a complex and multifaceted process that can be influenced by a range of factors, both internal and external. Overall, it will be interesting to see how M&A activity in India evolves in the coming months and whether any steps will be taken to address the current challenges.