As per the Indian Tech Startup Landscape Report 2023, over 950 new technology startups were founded and over 750 were funded in the past year.
“In 2023, despite facing global economic and regulatory challenges, Indian tech startups have prioritised the imperative of enhancing their business fundamentals, driving profitability and growth,” said Nasscom president Debjani Ghosh.
The country now has over 31,000 tech startups and their cumulative funding over the last five years has exceeded $70 billion. Further, the share of tech startups established in emerging hubs in tier-2 and tier-3 cities rose to 40% in 2023.
“Tier-II/III cities are transforming into new innovation hubs, decentralising the start-up landscape,” said Zinnov CEO Pari Natarajan, adding that India’s tech startup ecosystem continues to grow at an impressive clip.
Startups saw $6 billion in equity funding last year and 72% of all funding was at the seed-stage, compared to 64% in 2022, the report said.
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Amid the ‘funding winter’ plaguing startups globally, the report noted a significant decline in late-stage funding given valuation cuts and greater focus on profitability. Challenges with cash flows, funding availability, and low demand were the top three issues founders faced in 2023.“The ecosystem is likely to see improvement in funding, impending IPOs taking place, and innovation across disruptive technologies and key sectors,” the report noted.
Deal volumes were at 824 in 2023, down by 48% over the previous year. Yet, about 60% of the startup founders surveyed reported increased revenue and profitability in 2023.
About 46% of founders expect a better funding environment in 2024 and a significant portion of unfunded tech startups anticipate higher revenues in 2024 compared to funded ones, the report noted.
The expansion of the tech startup ecosystem signifies a resilient adaptation to macroeconomic, business and technology changes, Natarajan said, with DeepTech gaining prominence as a burgeoning sector.
Over $500 million went into DeepTech funding in 2023 and investments in this segment will continue on an upward trend in 2024, the report noted. Of the tech startups surveyed, 59% are leveraging DeepTech to drive greater organisational efficiency, 52% to reduce operational costs, and 41% to automate internal operations.
“DeepTech, a key innovation driver, accounts for just 14% of this funding, and needs an exponential acceleration to build India’s Deeptech ecosystem,” Ghosh said.
The report said adopting a pro-innovation, risk-based approach to AI regulation would be essential, alongside guiding startups on compliance with the Digital Personal Data Protection Act passed last year.
