Startup funding winter to end in 6-12 months as the number of registered startups increases: Redseer

The number of registered startups grew 9X from about 10,000 startups in CY18 to about 90,000 in CY22 indicating that the Indian startup ecosystem has matured rapidly in the last four years, said a report by Redseer, a strategy consultancy firm.

Also, the number of active investors increased 2X from 400 in CY18 to over 900 in FY22, the report said, adding global funding sources have also got more diverse. According to the study, the United States (US), the European Union (EU), the United Arab Emirates (UAE), and Japan are the major sources of investment for Indian startups, accounting for 5% of total global funding and 20% of total APAC funding.

Moreover, the report shows that 50% of the investors surveyed are positive that the funding spring will return in the next 6-12 months, while 17% of respondents thought it would happen sooner. The remaining believed it would be 12-18 months or more before the funding winter passes.

The funding pattern

So far, funding patterns indicate that 2023 will revert to the long-term trends similar to CY17 to CY20, hovering between $12 billion and $15 billion, after which it is likely to rise to $15-20 billion in CY24. The number of funding deals which dropped early in CY23 to 700-900 deals from 1,519 deals in CY22 is also expected to shoot back in CY24 to 1,000-1,200 deals.

Furthermore, VCs now have more dry powder than ever before, as per the reports, indicating a positive outlook. Out of the total number of deals this year, 90% are projected to be either seed or early-stage deals, mirroring the trend seen since CY17.

According to the consulting firm's analysis, ten stand-out themes emerged from the 1000+ analyzed. These include BPC, health and wellness, diagnostics and clinics, gaming and app studios, personal loans, CRO/CRM, Industrial eB2B, Insurtech, DevOps, and Finance. According to Redseer, these areas will give rise to the next generation of unicorns as the decade progresses.