Fintech Dominates Secondary Transactions for 2022, 2023

The latest edition of the Indian Startups Deal Report-2023, released by Bengaluru-based market intelligence technology company PrivateCircle, has spotlighted Fintech as the sector experiencing the highest number of secondary transactions in 2023 and 2022.

Secondary transactions involving existing shareholders selling shares to third parties were notably frequent in the Fintech domain. The report also highlighted SaaS (software as a service) as another sector witnessing substantial secondary deals in both years.

Sectoral Dynamics and Resilience in Secondary Deals

During the peak funding period in 2021, e-commerce took the lead in the highest number of secondary deals, closely followed by Fintech and Media & Entertainment.

Dr. Murali Loganathan, the Director of Research at PrivateCircle, shared insights on the findings. He noted that Fintech consistently featured across all three years, demonstrating the sector's capacity to provide viable exits for investors.

Additionally, SaaS emerged as a recurrent presence in secondary deals for 2022 and 2023, indicating the sector's resilience in delivering exit opportunities for investors.

According to The Hindu, the comprehensive analysis tracked 252 secondary deals across 117 startups, each valued at $500 million or more, over the past three years.

Decline in Secondary Deals and Primary Funding Trends

In contrast to previous years, 2023 witnessed an 80% year-on-year drop in secondary deals, totaling 13 across the 117 tracked startups.

The decline was part of a broader trend as primary funding experienced a significant 62% year-on-year drop in 2023. The total startup funding for the year amounted to ₹67,000 crores, marking a substantial decrease from ₹180,000 crores in 2022 and ₹242,000 crores in the peak year of 2021.

According to Entrepreneur, 2023 stood out as a six-year low for the startup ecosystem, dipping below the funding levels in 2018. A 72% year-on-year drop in deal counts further emphasized the cautious investor sentiment in 2023. The analysis focused on primary rounds, omitting secondary and debt funding rounds while exclusively considering Indian companies.

Despite the slowdown in funding rounds, Dr. Loganathan expressed optimism, noting that venture capital funds are poised for increased activity later in the year, given the typical 10-year investment cycle for such funds. The report also highlighted Lenskart's remarkable $500 million funding round from the Abu Dhabi Investment Authority as one of the notable funding successes in 2023.

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