“PROMOTION WINTER” for start-ups has been on everyone's lips for 18 to 24 months. A current report from the data platform Tracxn provides interesting figures. In the first 11 months of 2023 (ending December 5), startups in India received $7 billion in funding, the lowest level in five years and a 72% decline from the record $25 billion in 2022. More importantly, late-stage funding saw the largest decline at 73% from $15.6 billion to $4.2 billion. Early-stage funding fell 70% to $2.2 billion from $7.3 billion in the same period in 2022. There were only 17 large funding rounds over $100 million compared to 55 last year. Late-stage startups that raised more than $500 million included PhonePe, which went public, and D2C eyewear company Lenskart. OlaElectric, Zetwerk, InsuranceDekho and KreditBee received less than $200 million.

So is it just about the availability of funds or are there other factors that play a role? Shashank Randev, founder of 100X, which invests in early-stage startups, says his company has issued 62 checks of ₹ 1.25 crore plus in the seed stage in 2023. He says that while there is no shortage of capital, VCs are becoming more selective about investing in late-stage companies. “Investors are raising funds to deploy in just five companies, for example, as opposed to 15 a year ago, and are looking for outliers that are scalable and will become profitable,” he says. With some late-stage startups lined up to go public in 2024, “we still don’t have enough companies that investors want to put money into right away.”

Fear of missing out (FOMO) no longer seems to be in play. One reason for this may be the extent of governance problems at large Indian startups, which has made investors cautious. A classic example is Byjus, the Sequoia India, now Peak A partner at a leading VC firm says there was a time when the founders of Byjus made a take-it-or-leave-it offer to investors. According to its investor Prosus, which did not disclose the exact figure in the most recent earnings release, the company's value is now just under $3 billion. As of June 2023, the company was valued at around $5 billion. The IPO of Aakash, which Byjus had taken over, also seems uncertain. BharatPe once again went bankrupt with mudslinging, legal disputes and management restructuring. Others like Zilingo, GoMechanic and Trell also experience a mismatch between investor and founder.

Maybe investors will also clean up their behavior. Peak has reportedly