Fundraising for startups hits an 8-month low in February, falls over 83% year-over-year
- Investments in startups decreased significantly in February 2023 compared to a year ago.
- In total, PE-VC firms invested $596 million across 35 deals in February 2023, down from $3.6 billion across 103 deals in February 2022.
- Fintech and food startups emerged as the PE-VC favourites, accounting for nearly 60% of investments during the month.
Startup funding from private equity and venture capital firms hit an eight-month low of $596 million in February — registering a decline both on a month-on-month and year-on-year basis, Morgan Stanley said.
The decline in PE-VC funding has been drastic both in terms of funds raised as well as the number of deals. The amount of funding raised by startups fell over 83% from $3.6 billion in February 2022 to $596 million in February 2023. Total deals also dropped from 103 to 35, according to the report.
However, the drop in investment by PE-VC firms in startups is not a new trend. Fundraising fell off a cliff last July. Between January and June 2022, total investments by PE-VC firms were $17.9 billion. But between July and December 2022, startups managed to raise only $5.4 billion.
On average, startups managed to raise $3 billion per month in the first six months of 2022, which dropped to $900 million per month in the last six months of the year.
Fintech and food startups emerge as top PE-VC favourites
Fintech and food startups emerged as the PE-VC favourites, accounting for nearly 60% of total investments during the month.
Six fintech startups namely Insurancedekho, PhonePe, Mintoak, Stable Money, LoanTap and LoanKuber raised $280 million in February.
According to the report, there has been a shift in investment trends. While 66% of fintech investments last year went to lending companies, 63% of investments in February 2023 went to fintechs providing payment gateway solutions.
The restaurant and food category came in second, with $104 million raised by a single startup FreshToHome. Its Series D funding was led by Amazon Smbhav Venture Fund and will go towards opening 100 stores.
The remaining $212 million in funding was raised across categories such as e-commerce, edtech, enterprise tech and more.
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