Startup fundraising hits an 8-month low in February, falls over 83% YoY

• Investments in startups slowed down significantly in February 2023 asd compared to a year ago.
  
• Overall, PE-VC firms invested $596 million in 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 the investments during the month.
  

Startup funding by 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, says Morgan Stanley.

The slowdown in PE-VC funding has been drastic both in terms of the funds raised as well as the number of deals. The amount of funds raised by startups fell over 83% from $3.6 billion in February 2022 to $596 million in February 2023. The total deals also declined from 103 to 35, according to the report.


However, the fall in investments by PE-VC firms in startups is not a new trend. Fundraising fell off a cliff in July last year. Between January and June 2022, the total investments by PE-VC firms stood at $17.9 billion. However, between July and December 2022, startups managed to raise only $5.4 billion.


On an average, startups managed to raise $3 billion per month in the first six months of 2022, which fell 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 the total investments during the month.

Six fintech startups, namely Insurancedekho, PhonePe, Mintoak, Stable Money, LoanTap and LoanKuber raised a cumulative $280 million in February.

According to the report, there has been a shift in investment trends. While 66% of investments in fintechs last year went to lending businesses, 63% of the investments in February 2023 went to fintechs providing payment gateway solutions.


The restaurant & food category came in second, with $104 million raised by a single startup FreshToHome. Its Series D fundraise was led by Amazon Smbhav Venture Fund and will go towards opening 100 retail stores.

The remaining $212 million funds were raised across categories like ecommerce, edtech, enterprise tech, and more.

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