New Delhi, Dec 27 (KNN) The Indian startup landscape has faced difficult challenges in 2023, due to a combination of economic downturns and funding limitations, resulting in a substantial setback of USD 32 billion compared to 2022.

This funding crunch significantly impacted both late and growth-stage ventures, aggravating the situation with a decrease in the total value and number of fresh funds launched by venture capital firms, reported Inc24.

Notably, the total funding for the year 2023 witnessed a decline of USD 32 billion and USD 15 billion compared to 2021 and 2022, respectively, settling at USD 10 billion by December 25.

The year also witnessed controversies surrounding Indian startups, which raised governance concerns among venture capitalists, casting shadows over investor confidence and leading to dissatisfaction among Limited Partners (LPs).

Despite the challenges, 2023 saw the introduction of 64 funds, including venture capital funds, micro-funds, and corporate VC funds, totaling over USD 5.6 billion.

However, this marked a decline from the 126 funds launched in 2022, which raised over USD 18 billion for startup investments.

In 2023, early-stage startups emerged as the investor favorites. A total of 31 funds were launched with a combined corpus of USD 1.8 billion.

Notably, some early-stage venture capital firms, such as Blume Ventures, reported positive returns in 2023. Blume Ventures, known for backing unicorns like Unacademy, Slice, Purplle, and Spinny, disclosed that its inaugural fund (Fund I) and extension Fund IA have realised significant returns, aiming for 6x gross returns by 2024.

While the number of early-stage funds increased, a notable trend was the rise of micro VCs, focusing on small-ticket funding for pre-seed and seed-level startups.

Investors, including LPs, showed growing interest in micro VC funds, drawn by the potential for more growth opportunities.

In response to the changing landscape, venture capital funds are increasingly emphasising follow-on investments in well-performing portfolio companies, leading to a greater emphasis on growth-stage funding.

(KNN Bureau)