Startup Activity Report – July 2023

Date: 25 Aug, 2023

Total No of Deals Funded – 71 

Total Investment across the Deals- INR 3,248 Cr ($ 406.3 million)

Funding Pattern from January 2023 till July 2023

 Amount in USD Mn Top Investments of July 2023

Other notable deals this month included Genleap’s $50 million funding round and KaarTech’s deal of $53 million round in Course5Intelligence, $50 million in SafeSecurity and $45 million in Capillary Technologies.

Stage-wise Deal Analysis

 Amount in USD MN

The investor preferred to bet on the late stage deals with already having a good traction, rather than investing in seed stage deals. Here Seed Stage is defined for Pre-Revenue, Seed and Angel round deals, Early Stage is defined as Pre-Series A, Series A & Series B startups and Late Stage is defined as Series B and above deals

Top 5 Sector-wise Analysis

 Amount in USD MN

Source: Tracxn

Fintech emerged as the most favourites sector for the investors including Lending Tech and Insur-Tech, followed by Mobility.

City-wise Analysis

In July, the highest investment was done from Delhi NCR region participating in 24 deals, followed by Bangalore with 22 deals and Mumbai with 8 deals. Other cities include Surat, Pune, Chennai, Ahmedabad, Bhubaneswar and others participated in total of 17 deals. 

Regulatory Updates 

Angel Tax on Non-Resident Investments 

• The Finance Act 2023 has expanded the scope of the angel tax provision to include the issuance of shares to non-residents from the financial year 2023-24. Previously, this tax was charged only on the issuance of shares to persons resident in India. This is charged in the hands of the company (not being a ‘company in which the public are substantially interested’) receiving the consideration under the head of ‘Income from Other Sources’ on the amount of consideration received by it that is in excess of the ‘fair market value’ of the shares issued. This will have a significant impact on inbound investments in India. The Indian Government has also released the draft rules for valuation of shares for domestic and foreign investors.

Introduction of the Corporate Debt Market Development Fund  

• A new category of AIF called Corporate Debt Market Development Fund (“CDMDF”) is introduced. The CDMDF will act as a backstop facility for purchase of investment grade corporate debt securities to instil confidence amongst the participants in the corporate bond market during times of stress and to generally enhance secondary market liquidity.

Issue of units in dematerialized form 

• It is now mandatory for AIFs to issue units in dematerialized form subject to the conditions specified by SEBI. 

For More Details Read Here.  

Rockstud Thoughts:

While the Indian startup ecosystem has progressed significantly over the last decade, there are still issues that must be addressed. One of the most significant difficulties for entrepreneurs in India is a dearth of early-stage investment, which makes it difficult for firms to get off the ground. While overall the funding environment continues to witness slowdown, some of the active VC Funds in India have raised new capital in the past year and we can expect the pace of investments to pick up over the next couple of quarters. In the interim, we continue to see increased focus on due diligence prior to investments to ensure that the start-ups have a robust corporate governance framework. There is also a scarcity of experienced mentors and advisors, which can make navigating the complex world of entrepreneurship challenging for companies. Despite the obstacles, India's startup ecosystem is primed for further expansion and success in the future years. India is well-positioned to become one of the world's leading startup hotspots, with a supportive government, a rising pool of talent, and a culture that celebrates entrepreneurship.