Funding for startups in India fell by 40% between April and June, says PwC

Geopolitical instability appears to be weighing on Indian startups, with total funding down 40% to $6.8 billion in the April-June quarter, a PwC India report reveals.

Early-stage deals accounted for more than 60% of the total with an average deal size of USD 5 million, according to PwC India’s Startup Deals Tracker – Q2 CY22 report.

“After three consecutive quarters of raising over $10 billion, total funding for the Indian startup ecosystem fell 40% in Q2 CY22 to $6.8 billion.

“The decline can be attributed to a global slowdown, falling tech stock valuations, inflation and geopolitical instability,” he added.

Software as a service (SaaS) and fintech companies had the highest funding share in the second quarter of calendar year (CY) 2022, totaling more than $3.1 billion, according to the report .

He further stated that early-stage deals accounted for more than 60% of the total deal volume with an average ticket size of $5 million.

Seed-stage deal funding in Q2 CY22 was flat at around $800 million and may stay flat or even increase over the coming quarters as entrepreneurial activity continues to thrive with increased digitalization as well as the amount of venture capital funds waiting to be deployed in the Indian market, he added.

“We expect the overall funding landscape to take 1218 months to stabilize, during which time it would be beneficial for startups to increase their ‘funding track’ and ensure that the unit economy is strictly on plan,” said Amit Nawka, Partner – Deals and India Startups Leader, PwC India.

Valuations are expected to remain under pressure at all stages of funding, mainly due to the significant slowdown in funding in late-stage or initial public offering (IPO) deals, he added.

The report further states that Bengaluru, National Capital Region (NCR) and Mumbai remain the top startup cities in India, together contributing around 95% of total fundraising activity in the April to June quarter. 2022, followed by Chennai and Pune.

In Bengaluru, more than $100 million was raised by seven companies each in the second quarter of 2022 — Dailyhunt, Rapido, Leadsquared, Lenskart, CRED, Ather Energy and — primarily in the SaaS space, software and autotech.

In the NCR, seven companies – Delhivery, Stashfin, Rario, Gray Orange Robotics, Absolute Foods, Fashinza and PhysicsWallah – have raised over $100 million each.

In Mumbai, according to the report, more than $100 million was raised by four companies each. These include upGrad, Zepto, CoinDCX and Turtlemint.

Only four startups in India achieved unicorn status in the second quarter of calendar year 2022, reflecting a global trend of declining numbers of new unicorns in the last quarter. Globally, the total number of unicorns exceeded 1,200 with a peak in Q2 CY22 operational unicorns in the SaaS sector, followed by fintech.

The number of decacorns (startups valued at USD 10 billion) worldwide reached 57, with four new entrants in the April-June 2022 quarter.

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