Fintech saw the highest number of secondary transactions in both 2023 and 2022, according to PrivateCircle’s Indian Start-Ups Deal Report 2023. Secondary transactions occur when existing shareholders sell their shares to third parties.
Besides Fintech, SaaS also saw a high frequency of secondary deals in 2023 and 2022. During the peak 2021 funding peak, e-commerce saw the highest number of secondary deals followed by fintech and media and entertainment among others.
The analysis focused on 117 start-ups valued at $500 million or more in the last three years, tracking a total of 252 secondary deals for these start-ups since 2021.
Commenting on the findings, Dr. Murali Loganathan, director of research, PrivateCircle said, “We can see fintech coming up in all three years, showing the sector’s ability to provide exits to investors. SaaS is also common in both 2022 and 2023 showing the sector’s resilience in providing exits to investors.”
In 2023, 13 secondary deals were tracked across these 117 start-ups which is an 80 per cent drop in deal count as compared to 84 secondary deals recorded in 2022 and 155 deals in 2021.
Primary funding dropped 62 per cent
Start-up funding has dropped 62 per cent YOY drop in 2023. About Rs 67,000 crore was raised in start-up funding in 2023 as compared to around Rs 180,000 crores in 2022 and Rs 242,000 crore raised in 2021 which was a peak year in the Indian start-up ecosystem. 2023 is a six-year low for the start-up ecosystem, as the funding numbers have dropped below 2018, according to the report.
There was a similar YOY drop of 72 per cent in 2023 deal counts as compared to previous years. Primary funding rounds stood at 1,444 deals in 2023 as compared to 5000 odd deals in 2022. The report excluded secondary and debt funding rounds from this analysis. We have only considered Indian companies for this analysis.
“Even though funding rounds have slowed down, venture capital funds are sitting on ample dry powder. Funds usually have a 10 year cycle for investments and they can only raise capital in the first three. Given that the cautious approach of investors has now continued for almost two years, we expect to see VC activity pick up pace later this year,” Dr. Loganathan added.
Lenskart raised the biggest round
Mega $100 million deals were definitely hard to come by in 2023 and so was new unicorn emergence. However, the companies with strong business fundamentals did manage to raise big funding rounds. Lenskart raised the biggest funding round of $500 million from the Abu Dhabi Investment Authority. Followed by the likes of DMI Finance, PhonePe, CleanMax, Udaan, and others. The $600 million fundraising of Flipkart was excluded as the round was led by its parent entity Walmart.