Pune startups witness 70% dip in funding in 2023

Thus for the year 2023 Pune’s startup ecosystem had reported 35 deals with the total funding received to the tune of $359.94 million. This was a significant drop from the 51 deals signed in 2022, wherein the total funding reported was $1.06 billion (Source Starup Data Intelligence Platform TheKredible).

Pune had accounted for 3.19 per cent of the funding reported in India for 2023, while it had cornered 4.15 per cent of the funding in 2022. Fintech startups had cornered most of the funding in 2022. But last year it was a mixed bag with all sectors having representation.

Pune, as per government data, has over 5,900 registered startups that accounted for five per cent of the total startups in the country. The city’s proximity to Mumbai and its talent pool has seen it emerge as a major hub for Fintech startups.

For startups in Pune, this fund squeeze comes as a result of many trends and has more to do with the issues of governance and increasing wariness on the part of fund managers. Advait Kurlekar, TiE Pune Governing Council Member and Chair Nurture 12.0, said the squeeze is mainly because of the issues related to ethics and corporate governance. “As a country we are doing really well. But fund managers are extra cautious now,” he said.

Funds have suffered for betting on the wrong “punt”. This fund crunch the industry feels is a self-correction mechanism which the ecosystem is going through. “Edtech has seen massive bleeds due to issues related to ethics. Macroeconomics has nothing to do with the squeeze,” said a fund manager.

Funding refers to investment by Venture Capital Fund (VC) or Angel Investor into the startup. It can either be in terms of debt or equity (where the investor buys shares of the company).

Investment in startups over the last few years have become an increasingly attractive option for fund providers who want to multiply returns on their investment.

Given the startup ecosystem being touted as a segment where investments can return multifold, over the last few years big ticket investments have been reported. But this trend has now slowed down with fund managers being increasingly cautious over their decisions. Several startups which had raised big funds are now in the eye of a storm over issues related to fund management, corporate governance and ethics. The Edutech segment, which was one of the fastest growing sectors is under a virtual meltdown, with companies laying off en masse.

Pune’s trend, Jai Vardhan founder and CEO of startup tracker platform Entrackr, said was parallel to what is happening elsewhere in the world. “When US VCs sneeze, their counterparts across the world, including India, catch a cold. This is what has happened with funding in India. The VCs are looking for profitable or path to profitable bets, and focus has turned back on unit economics and sustainable growth,” he said.

Vardhan was optimistic that the cycle would turn but till then startups would have to survive what he called as the “brutal winter.”

Pranay Luniya, CEO of Pune-based Hyperloop company Quintrans, also agreed about the squeeze in funding. However, Luniya whose company had recently raised funds from government schemes welcomed the present trend. “This is good for the ecosystem. This will ensure the best of the players survive at the end,” he said.