Indian startups raised $6.9bn in the June quarter, down 33% sequentially

They raised $6.9 bn in Q2CY22 against $10.3 billion raised in Q1CY22; funding winter is a result of the market slowdown

Indian start-ups raised $6.9 billion in Q2CY22 (April-June) across 409 funding rounds. Total funding in the quarter declined 33 per cent from $10.3 billion raised in Q1CY22, according to Tracxn Geo Quarterly Report: India Tech Q2 2022.

Start-up fundraising also declined on a year-on-year (YoY) basis, from $10.1 billion.

With fundraising activity in the slow lane, the Tracxn report said this has led to a consensus among market players about a "winter of funding" or a downturn in investors' confidence and sentiment towards funding start-ups. Funding winter is a result of the market slowdown and economic volatility based on the current macroeconomic conditions and geopolitical situation intensifying inflation, interest rates, and commodity prices.

"Though investors are a little wary due to the current environment, it hasn't dampened the investment spirit of the community. They have become more decisive about the start-ups they want to nurture and are focusing extensively from a long-term gain perspective. Our in-depth monitoring of the Indian start-up space is compiled into a quarterly report to not only track the progress of VC and PE investments, but to also provide insights on emerging practice areas," said Abhishek Goyal, co-founder, Tracxn.

The top start-ups in terms of fundraising this quarter were VerSe ($805M- Series J), Delhivery ($304M- Series J), and Udaan ($275M- Series D). They were followed closely by ShareChat ($255M- Series G), and upGrad ($225M- Series F).

"We think that funding winter will continue for another year. However, this provides us a good opportunity to deploy capital with awesome founders running great businesses," said Vinay Bansal, founder-CEO, Inflection Point Ventures (IPV). The fund has been one of the most active funds in the seed-stage category, according to Tracxn.

Social platforms, internet first media, payments, B2B e-commerce, and e-commerce enablers formed the top sectors that received the most funding between April and June 2022. The report's key highlights include 121 new start-ups closing their first funding rounds, four start-ups turning unicorns, acquisitions of 62 start-ups, and five such firms filing for IPO.

With Leadsquared, Purplle, PhysicsWallah, and Open becoming new unicorns, the total valuation of unicorns escalated to $31.8 million in the past quarter. GOAT Brand Labs, Fashinza, and Itilite entered the soonicorn club with fundraises of $88 million, $135 million, and $47.2 million, respectively.

eMudhra, Delhivery, Handicrafts village, Eighty Jewellers, and Veranda Learning Solutions filed for IPOs. Blinkit (by Zomato), Whiteteak (by Asian Paints), and MyHQ (by ANAROCK) were the top acquisitions.  

According to the report, Bengaluru, Delhi, and Mumbai are the top cities attracting maximum investments. While IPV and Blume Ventures topped the investment charts in seed-stage start-ups, Sequoia Capital and Accel were listed at the top of the ranking for funding start-ups at early stages. Sofina and DST Global are the leading late-stage institutional investors.

How June qtr fared for start-ups:

• 409 funding rounds; 68 exits
• $805 mn raised by VerSe, most by any start-up
• 121 start-ups closed first funding rounds
• 4 start-ups turned unicorns, total valuation of unicorns jumped to $31.8bn
• 62 start-ups got acquired; 5 files IPOs
• $10.1 billion was raised in Q2CY21