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According to Inc42’s latest India Startup Funding Report 2023, e-commerce startups in India raised $2.6 billion annually, down 32% from $3.8 billion in 2022.
E-commerce led the charts as the most funded sector in 2023 in terms of number of transactions.In terms of funding amount, the e-commerce sector ranks second after fintech.
Overall, e-commerce funding has returned to 2019 levels, when the sector raised a total of $2.5 billion across 130 deals.
Indian e-commerce market expected to take a hit $400 billion by 2030experienced a notable contraction in startup funding in 2023. According to Inc42’s latest India Startup Funding Report 2023, e-commerce startups in India raised $2.6 billion annually, down 32% from $3.8 billion in 2022.
Meanwhile, the number of contracts closed decreased by 33.6% from over 288 a year ago to over 192. Overall, e-commerce funding has returned to 2019 levels, when the sector raised a total of $2.5 billion across 130 deals.
However, the good news is that e-commerce continued to lead the charts as the most funded sector in 2023 in terms of number of transactions. Enterprise technology and fintech followed with over 157 and 129 deals, respectively.
In terms of funding amount, the e-commerce sector came in second place. Fintech companies topped his race to raise more than $3 billion, while enterprise technology companies secured his third place with more than $1.3 billion in funding.
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Additionally, in the Indian e-commerce space, Mama Earth, another B2C e-commerce unicorn, has been listed on the Indian stock exchanges. The first venture company in this space to go public was Nykaa in 2021. At least one more IPO is expected in this space in 2024, with FirstCry aiming to list at 1,816Cr.
Despite an overall decline in fundraising in a year with an extended winter fundraising period, the e-commerce sector has emerged as the next best thing for investors. Meanwhile, let’s take a quick look at some of the major e-commerce financing trends observed in 2023.
- Big trades are back to 2020 levels: In the e-commerce sector, 5 mega deals were observed in 2023. While Flipkart raised $600 million from investors, Lenskart received the same amount in two mega rounds. In the year, Udaan and FreshtoHome earned $340 million each and he earned $104 million. Overall, megadeals in the e-commerce space have returned to the levels of his 2020, when only three megadeals occurred in the ecosystem.
- Median seed stage ticket size took a hit: The median ticket value at the seed stage fell to $300,000, enduring a 67% year-over-year (YoY) decline. For the third consecutive year, from 2020 to 2022, the median ticket size in this category remained at $1 million. However, in 2023, it will return to 2015 levels, the lowest in the past eight years.
- Late-stage startups accounted for 73% of total e-commerce funding: Most of the e-commerce startup funding will remain focused in the later stages of 2023. Late-stage startups raised more than $1.9 billion in 2023, or 73% of total e-commerce funding. Nevertheless, in this sector, no unicorns were born in this year, in contrast to 3 unicorns in 2023. In 2022 and he 2021 12 unicorns will be born.
- Delhi-NCR-based startups worst hit: Among the top three startup hubs in 2023, e-commerce startups in Delhi-NCR raised $761 million in funding, down 36% year-on-year compared to $1.1 billion raised in 2022. It became. Bengaluru e-commerce startups raised $1.4 billion (down 1% YoY) while Mumbai e-commerce startups raised $1.4 billion (down 1% YoY). He raised $329.81 million, marking a 17% year-over-year decline in 2023.
- D2C startups led the charts. Direct-to-consumer (D2C) brands continue to play a central role in e-commerce, securing $1.4 billion or 53.84% of total e-commerce funding in 2023. D2C startups raised funding in 135 deals, accounting for more than 70% of the total observed deal value. within the sector.
Seed and growth e-commerce startups most likely to be impacted in 2023
According to Inc42’s 2023 Annual Startup Funding Report, seed-stage e-commerce startups raised more than $89 million, a 65% year-over-year decline from the $252 million raised in 2022. In comparison, growth-stage startups and late-stage startups decreased by 43% and 24% from the previous year, respectively. .
In terms of number of deals, seed stage startups decreased by 25% year-on-year from 142 deals to 107 deals in 2022, while late stage startups were most affected, going from 41 deals to 16 deals in 2022. This was a 61% decrease from the previous year.
“Amid sector-specific challenges, investor attention has shifted to safer sectors such as fintech and healthcare, diverting focus and resources away from early-stage e-commerce ventures.” Co-founder of FAAD Network said Mr. Karan Verma, CEO and Director..
Overall market sentiment remained bearish in 2023 as the funding winter dragged on. At the same time, most e-commerce startups, especially those in growth and late stages, failed to show profitability in FY23. of 18 e-commerce companies Fiscal 2023 results will be disclosed in 2023only five companies were able to make a profit.
This led to lower growth and late-stage financing.
Will D2C continue to attract investors in 2024?
indian D2C This market, expected to reach $100 billion by 2025, is experiencing impressive growth due to factors such as the COVID-19 pandemic, increased internet penetration, robust digital infrastructure, and the rise of the millennial generation.
With over 190 million digital shoppers, India has the third largest online shopping base in the world. It is this burgeoning ecosystem that his new-age D2C brand seeks to tap into.
On the consumer side, growth for large companies remains subdued and the path to profitability remains elusive, according to Deepak Gupta, general partner at WEH Ventures. Models that imitate successes like Shanghai-based Pinduoduo have largely failed. Pinduoduo is a Chinese online retailer focused on traditional agricultural industries.
“So we’re seeing some degree of caution as e-commerce and other segments, for example D2C brands, are growing well and have recently received increased investor attention,” said Gupta.
In recent years, many D2C startups have also gone global by setting up operations in foreign territories or leveraging local marketplaces such as Amazon. Some of his globally active D2C brands include Lenskart, FreshToHome, BombayShavingCompany, Chumbak, Paper Boat, Wakefit, and Wow Skin Science, just to name a few.
The success of emerging D2C brands like Mamaearth, CaratLane and Nua, which have reached the 100 Cr revenue mark in a short span of time, is a testament to the thriving D2C environment in the country.
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