Pune, a thriving hub for startups in India, witnessed a substantial 70% dip in funding during 2023, signaling a significant course correction for the industry. The decline, attributed to a mix of ethical concerns and heightened caution among fund managers, has prompted startups to reevaluate their strategies in securing financial backing.
In a year marked by revelations of corporate governance issues among so-called Unicorns, fund managers are increasingly prioritizing factors such as ethics, profitability, and customer engagement before committing to investments. The cautionary approach has resulted in a notable drop in funding for Pune’s startups, with only 35 deals totaling $359.94 million reported in 2023, compared to 51 deals amounting to $1.06 billion in 2022 (Source: Startup Data Intelligence Platform – TheKredible).
Pune, known for its thriving fintech sector and proximity to Mumbai, holds a significant position in India’s startup landscape. However, the city reported a decrease in its share of national funding, accounting for 3.19% in 2023 compared to 4.15% in the previous year.
Government data reveals that Pune boasts over 5,900 registered startups, constituting 5% of the nation’s total. The city’s emergence as a fintech hub has contributed to its appeal, attracting talent from Mumbai and beyond.
According to Advait Kurlekar, TiE Pune Governing Council Member and Chair Nurture 12.0, the funding squeeze is primarily a response to concerns related to ethics and corporate governance. “As a country, we are doing really well. But fund managers are extra cautious now,” he stated.
The industry perceives the funding crunch as a self-correction mechanism, attributing it to poor decisions and ethical lapses in sectors like Edtech. Fund managers, reeling from investments in what they consider as the wrong “punt,” are exercising increased caution in their decision-making processes.
Funding, whether in the form of debt or equity, has been a crucial driver for startup growth. However, recent challenges have seen fund managers becoming more circumspect in their investments, focusing on sustainable growth and unit economics.
Jai Vardhan, founder and CEO of startup tracker platform Entrackr, noted that Pune’s funding trend mirrors the global scenario. “When US VCs sneeze, their counterparts across the world, including India, catch a cold,” he explained. VCs worldwide are now prioritizing profitable investments, emphasizing a return to basics in terms of unit economics and sustainable growth.
While acknowledging the funding squeeze, Pranay Luniya, CEO of Pune-based Hyperloop company Quintrans, sees the current trend as beneficial for the ecosystem. “This will ensure the best players survive at the end,” he stated optimistically.
As Pune’s startups navigate this challenging period, industry experts believe that focusing on ethical practices and demonstrating sustainable growth will be key to attracting the investment needed for recovery.
