The euphoria over venture capital deals in India — visible in 2021 and 2022 — has vanished, according to the latest KPMG Private Enterprises’ Venture Pulse report.

The report says that VC investment in India remained relatively soft in Q1 2023 as investors intensified scrutiny of potential deals. While the fear of missing out drove a lot of investment in India in 2021 and early 2022, investors have since increased their focus on start-up performance and profitability.

In absolute numbers, the deal value in Q1 2023 in India stood at $2.1 billion compared with $9.3 billion in Q1 2022 and $5.3 billion in Q1 2021.

“Fintech continued to drive many of the largest deals in India in Q1 2023 including $445 million raised by PhonePe, $218 million raised by NoBroker, $200 million raised by KreditBee and $150 million raised by InsuranceDekho.

“India also saw growing interest in agtech and gaming during the quarter. After a long period of Euphoria, interest in edtech in India died down considerably during Q1 2023,” the report said.

“The biggest change in India is that the euphoria for deals has died down. The big ticket deals have also dried up, which has an outsized impact on our total investment numbers,” said Nitish Poddar, partner and national leader, private equity, KPMG in India.

“But despite the visible decline, its important to know that a lot is still happening in India. The macros here are still very good. We are seeing a lot of funding in pre-series A deals. We are also seeing a lot of micro funds being raised in the country — funds under $100 million with check sizes from $1-5 million,” Poddar said.

Globally, VC investment was at $57.3 billion in Q1 2023 — the lowest level of quarterly investment since Q2 2017.