Start-up funding dips to $6 billion in Q2CY22 from $7.2 bn in Q1

Even as local start-ups navigate a funding crisis sparked by macro headwinds, the sector has found a glimmer of hope in a segment that seldom makes headlines: media and entertainment (M&E). Led by the makers of short-video apps Josh and Moj, which together garnered a little over $1 billion from investors in the April-June quarter, the M&E vertical helped sectoral funding, driving a considerable proportion of the investments during the quarter. Total funding for startups dipped to $6 billion in Q2CY22 from $7.2 billion in the January-March quarter, a report released by NASSCOM and PGA Labs shows. This translates into a decline of about 17%. M&E and fintech segments together cornered about 45% of the total quarterly funding.

The rise of homegrown short-video apps post the ban of TikTok has nudged investors to explore the space. A flood of affordable smartphones and cheap data tariffs have enabled millions to create content and market them on digital platforms, the haven of the young population, fuelling the growth of the segment. VerSe Innovation which owns Josh and local language content platform DailyHunt garnered a chunky $805 million in funding from a clutch of investors led by Canada Pension Plan Investment Board at a valuation of $5 billion. Rival Mohalla Tech that runs Moj and ShareChat secured $255 million during the quarter, closing a larger $520 million funding round. “52% funding by deal size was in the ticket size of $100 million or above with Dailyhunt and ShareChat raising big rounds,” analysts said, describing the M&E space as an ‘outperforming’ vertical.

In the fintech space, the payments vertical led the investments accounting for about 20% of the funding pie. Cred, for instance, closed a $140 million funding round in June. The investment, which included a mix of primary and secondary components, valued the start-up at about $6.4 billion. “The opportunity for fintech resides in market expansion, shaping customer behaviour, and long-term financial industry developments. Fintech continues to develop and grow with about 33% higher deal value than the previous quarter,” say analysts. The vertical also added one unicorn to the ecosystem during the April-June quarter after neobanking platform Open entered the $1 billion valuation club with a $50 million funding led by IIFL Finance.

In terms of total deal volumes, Sequoia and Tiger Global led investments in start-ups during the quarter. Almost 60% of the start-ups in which Tiger Global and Sequoia have invested are in the growth stage (series B to D). Sequoia Capital, Tiger Global, Alpha Wave and Accel have done over six deals across sectors, say analysts. “Tiger Global has more than 40% deals in the fintech sector and 20% in enterprise tech. Out of all the deals Sequoia has invested in, about 25% is in enterprise tech and around 20% in fintech,” they say.