Indian entrepreneurs are preparing for a worsening financing winter in 2023 as economic fears loom after a dramatic 35% reduction in funding in 2022, from $37.2 billion in 2021 to $24.7 billion (until November).

Although some startups, including the foodtech platform HealthKart ($135 million), the fintech platform KreditBee ($200 million), and the HRtech software-as-a-service (SaaS) platform BetterPlace ($40 million), raised respectable sums of money in December 2017 and the first few days of January, the overall scene is bleak due to the tightening of VC funding.

In 2022, thousands of people lost their employment due to significant tech company layoffs and an ongoing funding crisis.

In the third quarter of 2022, startup funding in India decreased to $2.7 billion, a two-year low, according to a PwC India research.

According to statistics provided by Tracxn, a major worldwide market intelligence platform, the considerable reduction in funding in 2022 was due to a decline in late-stage investments, which plummeted by 45% from $29.3 billion in January-November 2021 to $16.1 billion for the same period this year.

In comparison to the prior year, seed stage rounds also witnes sed a shrinkage and fell by 38%.

According to the research, 22 firms joined the unicorn club in 2022 as opposed to 46 the year before. The number of large-scale investment rounds ($100 million and above) decreased by 35% to 55 from 85 in the reported period.

According to the data, there were 30% fewer fundraising rounds this year than there were last year, when there were 2,647.

“The financial freeze, which started in Q4 of 2021, will continue till 2023. Startups are taking unit economics more seriously in order to survive the drought, as evidenced by the several mass layoffs that have happened this year “Neha Singh, a co-founder of Tracxn, remarked.

Though we are currently in a downturn, Singh had noted in a statement that the scenario is forcing companies to create clearer and more sustainable growth paths as investors’ evaluation measures tend to emphasize solid profitability above expansion at any costs.

The funding of the startup ecosystem According to recent warnings from Flipkart CEO Kalyan Krishnamurthy, winter may continue for another 12 to 18 months and the industry may experience “a lot of instability and volatility.”

2023 will continue to be the year of sustenance for the majority, and funders will continue to be more cautious, claims Shrijay Sheth, founder of Legalwiz. in.

“Both funding opportunities and valuation multipliers will become more conservative. Instead than spending money on expensive acquisitions-driven growth channels, startups must establish better unit economics. He predicted that geopolitical difficulties, the global supply chain crisis, and other macro issues would be dominant.

However, this year must also be viewed as a chance for tenacious, creative, and problem-solving entrepreneurs to differentiate themselves from the competition.

We may anticipate some exceptional company concepts to stand out from the competition with high levels of creativity and thriftiness as the macroeconomic situation becomes more challenging. Additionally, Sheth added, “the serious funding houses will predominate while the VC sector will see visitors take a break.