Continuing the global slowdown in funding, start-up funding in India hit a two-year low at $2.7 billion in the third quarter of the current calendar year (Q3CY22) across 205 deals, according to a report released by PwC India.
The report titled ‘Startup Deals Tracker-Q3 CY22’ showed that while there was a decline in funding at all stages of the funding, the decline has been the least at the early stage. A deal usually has three stages, early, growth and late.
“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,” Amit Nawka, partner of Deals & India Startups Leader, PwC India said.
“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,” Nawka added.
The funding activity declined to $2.7 billion in Q3CY22 from $6.6 billion in Q2CY22. At 59 per cent and 28 per cent respectively, the decline was both in terms of value and volume. Except for Edtech and e-commerce B2B, funding activity declined in all the sectors during the Q3FY22, the report added.
The average deal ticket size also declined from $23 million in Q2CY22 to $13 million in Q3CY22.
At 205, the number of deals fell in Q3CY22 from 285 in Q2CY22. It is the lowest number yet in CY22. HealthTech and e-commerce B2B were the only sectors that saw a rise in the number of deals.
“In terms of deal count, around 50 per cent of the total deals in this segment are growth/late stage companies, indicating increasing maturity in this segment,” it said.
Edtech company upGrad was the top acquirer in Q3CY22 with four acquisitions namely, Wolves India, Harappa Education, Exampur and Centum Learning.
Also, the largest deals were executed in the HealthTech space. Torrent Pharmaceutical’s acquisition of Curatio Health for $263 million was the biggest merger and acquisition (M&A) deal.
At 82, Bengaluru recorded the highest number of deals in the quarter followed by 46 in the National Capital Region (NCR). Mumbai recorded the third-highest number of deals at 44.
“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,” Nawka said.
“Founders who are focused on creating robust processes and a culture of growth and development will ensure that the learning curve across their organisation is better. They will manage upturns and down cycles efficiently,” Ashish Dave, CEO of Mirae Asset Venture Investments (India) said.