IAS Gyan

Daily News Analysis


10th April, 2024 Economy


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  • Foreign venture capital (VC) investments in India dropped over 85% in 2023 due to a funding winter, impacting major firms like Tiger Global, Peak XV Partners, Accel, and SoftBank.

Funding Winter Meaning

  • Funding Winter is a term used to describe a period when start-up companies experience a decrease in the amount of money they receive. This phenomenon has been occurring globally since 2022 and is anticipated to persist into 2023.
  • Prior to the funding winter, many start-ups could easily raise money at higher valuations.
  • However, investors worldwide have now adopted a conservative approach, drawing from their past experiences and growth.
  • Despite the reduced opportunities for start-ups to secure investments, those with the best business ideas, strong teams, effective management, and robust compliance measures continue to attract funds.

In short,

  • A funding winter refers to a period of decreased investment activity in the startup ecosystem.
  • During this time, venture capitalists and other investors become more cautious, leading to reduced funding opportunities for startups.
  • Factors contributing to a funding winter can include economic uncertainty, market volatility, or shifts in investor sentiment.
  • Startups may find it challenging to secure financing during a funding winter, leading to slower growth and potential consolidation within the industry.


Q. Which of the following best defines the concept of "funding winter" in the context of the startup ecosystem?

A) A period of increased investment activity and opportunities for startups.

B) A phase characterized by decreased funding opportunities and cautious investor behavior.

C) A time when government grants and subsidies for startups are at lowest.

D) A season marked by stable funding flows for startups.

Correct Answer: B) A phase characterized by decreased funding opportunities and cautious investor behavior