Karnataka's Tech Startup Funding Plummets by 72% in 2023: Report

Total funding into Karnataka-based tech startups sharply fell 72 per cent to USD 3.4 billion in 2023, from USD 12.2 billion in 2022, according to a report by Tracxn Technologies, a data intelligence market research platform. The decline is attributed to prevailing macroeconomic conditions and geopolitical issues, impacting the overall funding landscape.

Sharp Decline in Funding Rounds Over USD 100 Million

The report highlights a notable decrease in the number of funding rounds exceeding USD 100 million, with only eight such rounds recorded in 2023. This marks a significant drop from 26 in 2022 and 44 in 2021, indicating a challenging funding environment for Karnataka's tech start-ups.

PhonePe and Udaan Lead Funding Amidst Tough Year

Notably, PhonePe and Udaan emerged as frontrunners in 2023, securing the highest funding in Series D and Series E rounds. PhonePe raised an impressive USD 623 million, while Udaan secured USD 377 million. However, the report highlights that no new unicorns emerged from the Karnataka tech space in 2023, a stark contrast from seven unicorns in 2022 and 18 in 2021.

Segment-wise Funding Dynamics

Fintech, retail, and enterprise applications emerged as the top-funded segments in 2023. The fintech sector in Karnataka secured USD 1.15 billion, representing a 51% decline from the USD 2.4 billion raised in the previous year. Similarly, the retail sector witnessed a 56% decline, with total funding amounting to USD 956 million, compared to USD 2.16 billion in 2022. The enterprise applications sector also experienced a substantial drop of 68%, securing USD 928 million in 2023, down from USD 2.89 billion in 2022.

Acquisitions and IPOs Paint a Dismal Picture

The report further reveals that the Karnataka tech sector witnessed 35 acquisitions in 2023, significantly lower than the 48 recorded in 2022 and 57 in 2021. Moreover, none of the companies in this space went public in 2023, in contrast to two IPOs in 2022.

City-wise Funding Distribution

Bengaluru took the lead in city-wise funding, with startups based in Bangalore raising USD 3.4 billion in 2023. In contrast, startups in Hubli raised a modest USD 121,000 during the same period.

Investment Landscape and Future Outlook

Accel, Wellfound, and LetsVenture emerged as the top investors in the state of Karnataka, showcasing their commitment to the region's start-up ecosystem. We Founder Circle, Y Combinator, and 100X.VC were identified as the top seed-stage investors, while Accel, Lightspeed Venture Partners, and Kalaari Capital were prominent early-stage investors. Notably, Footpath Ventures, Founders Circle Capital, and DST Global were recognized as the top late-stage investors.

Despite the challenging year, the report emphasizes the resilience of Karnataka's tech startup ecosystem. As the landscape continues to evolve, industry stakeholders are keenly watching for signs of recovery and renewed investor confidence in the coming years.

Join Our Thriving Entrepreneurial Community

Follow TICE News on Social Media and create a strong community of Talent, Ideas, Capital, and Entrepreneurship. YouTube  | Linkedin | X (Twittrer) | Facebook | News Letters