Investments in India have relatively rationalized following a record active year in 2021 – in line with the global macroeconomic sentiments led by rising inflation, hike in fed rates, falling public markets, yield curve inversions predicting a recession, and cautious investors asking tougher questions about the path to profitability and valuations. As a result, startups/founders are prioritizing profitability while investors are being conservative on deal valuations. 
Key takeaways from the previous quarter:
PE/VC deal flow continues to be robust though the overall funds invested have dropped significantly
The startup ecosystem has seen a significant drop in funding Q-O-Q, with the previous quarter receiving the least $ investment in the last year. On the other hand, there was a steady increase in number of deals, making it the quarter with the highest # deals closed
As per PGA Labs deal database, Indian startups collectively raised US$ 5B in a total of 442 deals in Q3 CY22. This is a 69% drop in the funding amount and a 27% increase in the number of deals as compared to the previous quarter

Average deal size has dropped significantly, led by a decline in # large cheque investment in CY22
There is a visible shift in preference to early-stage investments across sectors with an average deal size of US$ 15M, a decline of 70% compared to the previous quarter

Early stage and growth stage deals with small cheque size (less than US$ 25M) have increased in CY22
75% of deals announced over this quarter were early-stage investments, with 68% of transactions value at under US$ 10M.

Consumer app & platforms and SaaS/AI were the top-funded sectors, collectively raising US$ 1.2B and US$ 0.7B respectively in Q3 CY22
Notable deals: Blu Smart Mobility, an electric shared smart mobility platform was the top fundraiser receiving an investment of US$ 250M followed by upGrad, an EdTech unicorn, raising US$ 210M. Digital lending platform, EarlySalary and customer retention platform, CleverTap raised US$ 110M and US$ 105M, respectively.
Following are the sector-wise investments as per PGA Labs classifications:

Global correction in public market valuation of tech companies has adversely impacted private markets as well
Leading global tech indices with the likes of NASDAQ composite, TecDAX, NASDAQ 100 tech, and Fang witnessed a decrease in stock valuations replicating a similar pattern in the tech investments in Q3 CY22, with a significant fall of 74% from the previous quarter.
Although the NASDAQ composite and other major indices clocked nearly a 4% gain after the Fed hikes interest rate, as predicted, the impact is relatively low, and markets are down on an absolute level.

The pace at which unicorns are forming remained stagnant in Q2 & Q3 CY22
Only five startups in India attained unicorn status in the third quarter of calendar year 2022, mirroring a global trend in decline in the number of new unicorns last quarter. The total unicorn count at the end of Q3 CY22 stands at 108 in India. The unicorns in Q3 included OneCard (FinTech), 5ire (Blockchain), Shiprocket (Logistics), Tata 1MG (Healthtech) and Molbio Diagnostics (HealthTech), stagnating the pace at which unicorns are being formed.

While overall the market is witnessing a slowdown and is expected to remain conservative at the momentum, there is also a growing interest among Sovereign Wealth Funds, Pension Funds and Hedge Funds in the Indian startup ecosystems as valuations are considerably moderate now. Geopolitical and regulatory risk in China continues to be on the rise and for dollar denominated funds, it is still a risky market to invest. In this context, the overall funding landscape should eventually stabilize with enough dry powder available amongst India-focused VC/PE firms waiting to be deployed in the Indian market.