Private capital raised by startups in Southeast Asia and India more than halved in 2023, compared with the previous year, marking the second straight fall in annual deal value.
However, unlike in 2022, when the number of venture transactions was more or less flat vis-à-vis 2021, last year saw a significant fall in deal volumes.
Southeast Asian startups raised $7.62 billion in equity funding in 2023—a 53% plunge from the previous year, according to DealStreetAsia DATA VANTAGE’s SE Asia Deal Review: Q4 2023 report.
At the same time, the region witnessed only 718 venture deals last year, down 30% from 2022’s deal volume of 1,028, as investor caution, amid macroeconomic headwinds and geopolitical strife, curtailed capital flows.
In contrast, the number of deals had increased 6.1% in 2022 from 2021.
A weakness in early-stage dealmaking was responsible for the fall in deal volume.
A similar story played out in India, where, for the whole of 2023, funding shrunk 56% to touch $11.8 billion, from the previous year’s $26.6 billion, according to the India Deal Review: Q4 2023 report. This follows a 42% year-on-year fall in 2022.
Deal volume was also down 40% from 2022’s 1,562 transactions. In 2022, the transaction volume had dipped only marginally. (See chart below)
Big-ticket cheques in India were few and far between in 2023 as investors tightened their purse strings. This had a major impact on fundraising in the year.
“The funding challenges experienced in 2023 acted as a testing ground for startups. Those entrepreneurs who remained focused on profitability and cash conservation continued to thrive,” said Vikram Gupta, Founder & Managing Partner, IvyCap Ventures.
Chinese startup fundraising holds up in 2023
In China, despite the private equity-venture capital scene getting mired in geopolitical tensions, the full-year fundraising value of $50.5 billion was only 5% lower than 2022’s $53.2 billion.
At 2,588, the volume of PE-VC transactions was also up 13% from 2,290 deals in 2022, according to the Greater China Deal Review: Q4 2023 report.
Healthy dealmaking in the early stages was responsible for the resilience shown by Chinese startups in 2023. More than half the deals sealed last year were in the Series A round.
“The valuation shift is here to stay—definitely for the next 4-5 years. Funds that have been deployed over the last 3-4 years need to see good exits and if that happens, valuations can start to rise again,” said Visa Kannan, Partner, Saison Capital.
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