Fintech Dominates Secondary Deals In 2023 A secondary round takes place when an existing shareholder sells their shares to a third party
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Fintech saw the highest number of secondary transactions in 2023 and 2022, according to a recent report. Besides fintech, SaaS also saw a high frequency of secondary deals in those two years.
The report by private market intelligence platform, PrivateCircle Research, also says that during the 2021 funding peak, e-commerce saw the highest number of secondary deals followed by fintech, and media & entertainment among others. The firm's secondary deals analysis is limited to 117 startups that have been valued at $500 million or above in the last three years. A total of 252 secondary deals was tracked for these 117 startups since 2021.
To the uninitiated, a secondary round occurs when an existing shareholder sells their shares to a third party. "We can see fintech coming up in all three years, showing the sector's ability to provide exits to investors. SaaS is also common in both 2022 and 2023 showing the sector's resilience in providing exits to investors," said Murali Loganathan, Director of Research, PrivateCircle.
Primary funding dropped 62%
The report also says that startup funding has dropped 62% YOY in 2023. About INR 67,000 crore was raised in startup funding in 2023 as compared to around INR 180,000 crore in 2022 and INR 242,000 crore raised in 2021 which was a peak year in the Indian startup ecosystem. 2023 saw a six-year low in the startup ecosystem, as the funding numbers have dropped below 2018.
"Even though funding rounds have slowed down, venture capital funds are sitting on ample dry powder. Funds usually have a 10 year cycle for investments and they can only raise capital in the first three. Given that the cautious approach of investors has now continued for almost two years, we expect to see VC activity pick up pace later this year," Loganathan added.
Mega $100 mn deals were hard to come by in 2023 and so was new unicorn emergence. However the companies with strong business fundamentals did manage to raise big funding rounds, says the report, adding that Lenskart raised the biggest funding round of $500 million (excluding the $600 million fundraising by Flipkart, led by its parent entity Walmart) from Abu Dhabi Investment Authority, followed by the likes of DMI Finance, PhonePe, CleanMax, Udaan, and others.
Even though there has been a global downturn and funding winter, if one looks at the funding or growth scenario from a macro perspective, India has been growing year on year and experts believe that we will continue to shine in the coming years as well. "Companies are receiving funds and we are on a progressive path. On a quarterly basis, there is a downturn. But, overall, we are growing year on year and there is a sign of maturity of the ecosystem from both sides, bottom and top of the pyramid," said Shashank Randev, Founder VC, 100X.VC, while speaking at Entrepreneur India's E Live x India Investment Forum 2023 in Mumbai.
"As a consumer fund, we are super excited about the next two decades for India as a country. Stars are aligned well in terms of the consumer boom that is set to happen here," added Hariharan Premkumar, Managing Director and Head of India at DSG Consumer Partners.