Start-up funding hits two-year low in Q3 CY22 at $2.7 billion in India: PwC India Report

Early stage deals contributed around 21% of the total funding by value compared to 12% in Q2 CY22.

Mumbai: According to the PwC India report "Startup Deals Tracker - Q3 CY22," start-up funding in India hit a two-year low of $2.7 billion across 205 deals in the third quarter of fiscal year’22. 

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.

PwC India partner of deals and India startups leader Amit Nawka said, "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. 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."

Startup Perspectives for Q3 of CY22 – A snapshot

Stages of funding: Growth and late-stage funding deals accounted for 79 per cent of the funding activity in Q3 CY22 (in value terms). These represented 30 per cent of the total deal activity (count terms). The average ticket size in growth-stage deals continued to decline and was $32 million during Q3 CY22. Early-stage deals accounted for 70 per cent of total funding in Q3 CY22 compared to their 60 per cent share in Q2 CY22 (in volume terms). The average ticket size per deal ranged between $4 and $5 million. In value terms, early-stage deals contributed around 21 per cent of the total funding in Q3 CY22, compared to around 12 per cent in Q2 CY22.

M&A transactions: 38 merger and acquisition deals involving start-ups were executed in Q3 CY22: 30 domestic, five inbound, and three outbound deals. SaaS and edtech witnessed the highest number of M&A transactions during Q3 CY22: nine in SaaS and seven in edtech. Edtech company UpGrad has been the top acquirer this quarter with four acquisitions: Wolves India, Harappa Education, Exampur, and Centum Learning.

Global and Indian unicorns: Only two start-ups in India attained unicorn status in Q2 CY22, mirroring a global trend in the decline in the number of new unicorns this last quarter. Globally, Q3 CY22 produced 20 unicorns, and 45 per cent of them are from the SaaS segment. No new decacorns were added in this quarter.

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