The global slowdown in funding continues with start-up funding in India in Q3 hitting a two-year low at $2.7 billion across 205 deals…reports Asian Lite News
Only two startups in India, Shiprocket and OneCard, attained the unicorn status (valuation $1 billion and above) in the July-September period, mirroring a global trend in decline in the number of new unicorns, a PwC India report showed on Thursday.
Globally, the third quarter (Q3) produced 20 unicorns and 45 per cent of them were from the software-as-a-service (SaaS) segment. No new decacorns were added in this quarter.
The global slowdown in funding continues with start-up funding in India in Q3 hitting a two-year low at $2.7 billion across 205 deals.
“It is tough to predict how long the slowdown in funding will last but clearly, both founders and investors are being more selective and cautious in deal-making. In general, early-stage start-ups will be able to raise capital more easily as they are typically more insulated than late-stage deals from fluctuations in the public markets,” explained Amit Nawka, Partner-Deals and India Startups Leader, PwC India.
However, investors have already raised a lot of capital which needs to be deployed and this will ultimately find its way to the Indian start-up ecosystem, he added.
While a decline in funding is noted across all stages of investment — early, growth and late — the decline has been the least in early-stage deals which contributed around 21 per cent of the total funding by value in Q3 CY22 compared to approximately 12 per cent in Q2 CY22, showing that venture capital (VC) firms continue to back the Indian start-up ecosystem.
Growth- and late-stage funding deals accounted for 79 per cent of the funding activity in Q3 CY22 (value terms).
There were 38 M&A deals involving startups — 30 domestic, five inbound and three outbound deals.
SaaS and edtech witnessed the highest number of M&A transactions during Q3- nine in SaaS and seven in edtech, said the report.
Edtech company upGrad has been the top acquirer this quarter with four acquisitions — Wolves India, Harappa Education, Exampur and Centum Learning.
The funding in Indian startups nosedived a massive 80 per cent (year-on-year) in the third quarter (July-September period) this year, with the late stage funding seeing the biggest fall, a report showed on Tuesday.
Indian startups raised $3 billion in Q3, which was also 57 per cent lower as compared to the previous quarter (Q2) this year.
The average ticket size also witnessed a drop across all funding stages, with the late stage seeing the biggest fall of over 70 per cent, from $142 million in Q3 2021 to $42 million in Q3 2022.
This indicated that investors are not willing to make large investments until economic conditions stabilise, reports market intelligence platform Tracxn.
“India is currently experiencing a funding slowdown which is expected to continue for the next 12-18 months and the effects of the funding slowdown are expected to intensify going forward,” said Neha Singh, Co-Founder, Tracxn.
Executives across the world anticipate a recession in the near future and are making preparations to cut costs.
“To add to their woes, the recent energy crisis in the UK and Europe and also the sliding GBP and EUR have increased the likelihood of a global recession,” Singh added.
Genomics sector in India saw maximum investor interest in Q3, receiving over $231 million in funding, which is higher than the total funding received in the year 2021.
The five companies that raised funding rounds of more than $100 million in the quarter were EarlySalary, 5ire, InsuranceDekho, OneCard, and BookMyShow, with the most active investors being Better Capital, Venture Catalysts and Surge.
Some of the other key highlights were 109 startups closing their first funding round, three startups turning unicorns, 39 startups getting acquired, and two filing for their IPOs.
Molbio Diagnostics, 5ire and OneCard turned unicorns and Zopper, LifeCell, Jar, DotPe, Vegrow Bigspoon, InsuranceDekho, CUSMAT, Airtribe and Serentica Global joined the Soonicorn club.
India received $752 million in funding in the month of September, down by 15 per cent as compared to August and down by 83 per cent as compared to the same period last year.
“We are seeing large PE and VC funds treading cautiously led by significant changes in the investment environment in recent quarters. We expect this to continue until we see signs of stabilisation globally,a said Abhishek Goyal, Co-Founder, Tracxn.