Why in news? According to IVCA and Bain & Co.’s new ‘India Venture Capital 2023’ report India accounted for 20 per cent of all venture capital (VC) funding in the APAC region for the first time in 2022, even as the year was defined by a capital market slowdown.

Highlights:

• In global terms, 5 per cent of all VC investments flowed into India, according to ‘India Venture Capital 2023’ report.
• Much of India’s growth was driven by the world’s China-plus-one strategy as well as India’s own rapid adoption of internet-enabled services.
• For the second year in a row, India also added more unicorns (23) than China (11), despite no new unicorns were added by India in the last quarter of 2022.
• Venture Capital funding also continued to be more spread out, with new emerging start up hubs beyond Bengaluru, Mumbai, and Delhi-NCR receiving ~18 per cent of the capital, and accounting for 9 out of 23 new unicorns in 2022.
• Funding momentum slowed across the world, with total deal value declining 33 per cent from $38.5 billion in 2021 to $25.7 billion in 2022, but India continued to demonstrate positive economic outlook.
• Report suggested SaaS(Software-as-a-service) and Fintech continued to see momentum in funding in 2022 and they were the most funded sectors last year.
• Sectors such as EV, Agritech, generative AI, space tech, and climate tech are the emergent sector which gained interest from funding
• Consumer tech (which includes e-commerce, edtech, D2C, food delivery, etc.) saw a drop in funding as it is typically higher cash-burn business model .

What made India as an attractive investment destination ?

• India growth story continued to attract new investors because of “structural enablers”. The Structural enablers include:
• India’s large consumption potential
• Inclusive growth led by large-scale digital adoption of the decentralized India Stack
• Effective fiscal and monetary policy discipline limiting inflationary growth
• Tailwinds from economic activity shifting away from China.