Startup funding drops by a third in April-June quarter

Indian startups raised $6.9 billion in 409 funding rounds during the three months ended June 2022, according to a report by market intelligence platform Tracxn.

The total funding declined by 33% from $10.3 billion in the first quarter of calendar year 2022 to $6.9 billion in the April-June period, the report says.

Fundraising during the last three months also witnessed a decline in comparison to the same quarter last year (Q2 2021), where the total funds raised were $10.1 billion.

This, according to Tracxn, is leading to a consensus among market players of a "winter of funding" or a downturn in investors' confidence and sentiments towards funding startups.

"Funding winter is a resultant of the market slowdown and economic volatility based on the current macroeconomic conditions and geopolitical situation that's intensifying inflation, interest rates, and commodity prices," the report says.

Top start-ups which raised funds during the quarter include Dailyhunt parent VerSe Innovation ($805 million - Series J), Delhivery ($304 million - Series J), and Udaan ($275 million - Series D). They were followed closely by ShareChat ($255 million - Series G) and upGrad ($225 million - Series F).

Social platforms, internet-first media, payments, B2B e-commerce and e-commerce enablers are the top sectors receiving the most funding from investors between April and June 2022, the report says.

121 new startups closed their first funding rounds, 4 startups turned unicorns, 62 startups got acquired, and 5 filed their IPOs, the report adds.

With Leadsquared, Purplle, PhysicsWallah, and Open becoming new unicorns, the total valuation of unicorns increased to $31.8 billion in the past quarter (Q2 2022).

G.O.A.T Brand Labs, Fashinza, and Itilite entered the soonicorn club with fundraises of $88M, $135M, and $47.2M respectively. With respect to exits, while eMudhra, Delhivery, Handicrafts village, Eighty Jewellers, and Veranda Learning Solutions filed for IPOs (initial public offering), Blinkit (by Zomato), Whiteteak (by Asian Paints), and MyHQ (by ANAROCK) were the top acquisitions.

The report tracks the Indian startup ecosystem by delineating the funding raised by startups, investors' exits through acquisitions and IPOs, and the wider trends of the fundraising landscape.

"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 startups they want to nurture and are focusing extensively from a long-term gain perspective," says Abhishek Goyal, co-founder, Tracxn.

Bangalore, Delhi, and Mumbai are the top cities attracting the maximum investments, as per the report. While IPV and Blume Ventures topped the investment charts in seed-stage startups, Sequoia Capital and Accel ranked highest in the early-stage startups funding standing. Sofina and DST Global are the leading late-stage institutional investors.