July's VC funding wave breathes new life into startup ecosystem

livemint.com:

BENGALURU : Angel and venture capital investments rebounded in July from the trough seen in April, highlighting a steady recovery in the startup ecosystem amid the prevailing funding winter. Even though the number of deals fell marginally last month from June, the quantum of investment rose, indicating that the worst may be over. Investors struck 71 deals during the month, slightly lower than 73 recorded in June but considerably higher than the 58 deals seen in April when investment activity sank to a nine-year low.

Domestic startups raised about $666.6 million last month, 55% more than the previous month’s figure of $430 million, according to data collated by VCCEdge, the data research platform of VCCircle. The average deal size also rebounded to $9.3 million in July from a sharp decline in June, reflecting growth in larger deals. However, startups may not be completely out of the woods, yet.

Though deal volume rose sequentially in July, it was a record low for the month compared to previous years. On average, July usually has recorded more than 110 deals every year since 2014. With 71 deals, July 2023 had the lowest volume compared to the same month every year since 2014.

Startup funding has remained weak for more than a year, reversing from a period of record investments and skyrocketing valuations in 2021. A variety of factors such as stock market volatility, correction in global tech stocks, and rising interest rates have influenced the funding slump. “We are almost halfway into the FY, and I expect the second half to perform better for seed to Series A/B stage equity transactions since valuation expectations are more aligned now," said Rahul Chowdhury, managing partner of venture capital firm N+1 Capital and debt