Funding into Karnataka-based tech startups plummets by 72%. Here's what investors are looking for

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unicorn companies in the country, according to a report published by Tracxn, a data intelligence platform. The Tracxn Geo Annual report stated that Karnataka's tech startup ecosystem received a total funding of $3.4 billion in 2023, which is a 72% plunge from the $12.2 billion raised in 2021, and an 83% decline from the $20.4 billion raised in 2021.

In this space, companies attracted late-stage investments worth $2.3 billion in 2023, a 74% decline compared with $8.9 billion in 2022, while the early-stage funding stood at $784 million in 2023, a drop of 71% from the $2.7 billion raised during the previous year, followed by 54% drop in seed-stage funding to $294 million from the $643 million raised in 2022. Only two startups including PhonePe and Udaan secured the highest funding in 2023, raising $623 million and $377 million in Series D and Series E funding rounds respectively.

It is pertinent to note that no new unicorns emerged from Karnataka's tech startup ecosystem in 2023, contrasting seven Unicorns in 2022 and 18 in 2021. Also, no new companies from this space went public in 2023, as against two IPOs in 2022, the Tracxn report revealed.

There were three top-funded segments including fintech, retail, and enterprise applications in 2023. Karnataka's fintech sector secured a total funding of $1.15 billion in 2023, a decline of 51% compared with the $2.4 billion raised during the previous year.

The Retail sector witnessed total funding of $956 million in 2023, a decline of 56% compared with the $2.16 billion raised in 2022, the report said, adding that the Enterprise Applications sector attracted investments worth $928 million in 2023, a plummet of 68% from the $2.89 billion raised in 2022. Bengaluru took the lead in