Indian startup funding: Investors remain cautious despite surge in November funding to $1.27 billion

Indian startups raised $1.27 billion in funding in November, the best degree in a month since June, when a slowdown in funding grew to become palpable and started to have an effect on the monetary market in India. The surge in funding final month was led primarily by early and growth-stage rounds that crossed the $1 billion mark in proceeds after greater than 5 months, in line with Enterprise Intelligence knowledge.

Trade insiders mentioned the newest knowledge can be for offers that closed a couple of months in the past, as that is sometimes the time it takes to formally announce the fundraiser. Regardless of a slight improve in deal exercise, know-how buyers mentioned it doesn’t level to a sustained restoration. Late-stage financing additionally continues to be underneath strain.

The info confirmed that after June, when Indian startups raised $2.36bn, funding exercise slowed to round $877m in July, $981m in August and $787m in September. Nonetheless, the final two months have seen a gradual restoration, with a complete fundraiser of $1 billion in October.

Investments in Indian startups in 2022ETtech

Individually, knowledge offered by market intelligence platform Tracxn confirmed that out of the highest 10 transactions in 2022, 9 closed within the first half of the 12 months.

Anand Lunia, founding associate of India Quotient, a seed-to-early stage enterprise capital agency targeted on India, mentioned: manner occurring.”

Uncover the tales of your curiosity



On why there’s a pickup in funding exercise now, Lunia mentioned: “The reason being that the hangover from 2021 was over within the minds of VCs in January-February. However the founders have been mentally in 2021 till June or July of this 12 months. Their valuation expectations remained in the identical place.”

Suggestions Reset


A enterprise capital investor who spoke to ET on situation of anonymity mentioned the founders initially hoped for higher valuations however finally signed offers as they started to close the tip of their money run.

“Within the first quarter of 2022, there have been founders who wished the everyday $5 million for 20% seed funding, however by then buyers had gotten actual. A founder who wasn’t able to do a $3 million cope with us in Feb-March got here again and signed a $1 million elevate in August,” this particular person mentioned.

Ten biggest financing deals in 2022ETtech

Bengaluru-based Arpit Agarwal, an investor in early-stage fund Blume Ventures, mentioned: “The market stays sluggish… There could have been offers that the founders have been trying to shut that ended at lower-than-expected valuations. Many founders managed to lift a considerable amount of capital final 12 months and wouldn’t have required funding within the first half of this 12 months… I nonetheless do not see this as an indication that the market is coming again,” added Agarwal.

Entrepreneurs are nonetheless ready to get via the funding winter by not opting to lift a brand new spherical. “I want to keep away from a fundraiser as a lot as potential within the subsequent six months. Valuations will probably be emphasised even for comparatively higher corporations with robust economics. I took on a small quantity of debt for working capital and that is higher now than taking cash via an costly inventory sale,” mentioned the founding father of an online-focused meals model.

“The main target is to additional strengthen the economics of the unit and present profitability, which is the brand new benchmark between non-public fairness buyers and public market buyers,” he added.

Pondering sooner or later


Whereas the upward momentum in funding exercise is anticipated to proceed over the approaching months, not many buyers are writing checks for post-Collection B rounds, IndiaQuotient’s Lunia mentioned.

“Folks will wait and watch to see who actually performs and who survives earlier than coming into into extra Collection-B offers. The second half of subsequent 12 months, Collection B, C, D offers will begin to occur, however the first half is unlikely to occur a lot. Generally, enterprise capitalists now focus solely on seeds,” Lunia mentioned.

Throughout a panel dialogue on the ET Startup Awards in November about rebooting within the tech trade, Flipkart Group CEO Kalyan Krishnamurthy
mentioned the subsequent 12-18 months would see Indian startups undergo turmoil and volatilityand the funding disaster will begin to hit these new-age tech corporations early subsequent 12 months.

Issues would enhance after that and firms ought to concentrate on surviving this era, he mentioned. “It’ll be robust subsequent 12 months… I feel lots of people will hit the market (to lift funds) between April and June of subsequent 12 months. That’s in all probability the second of reality for all of us within the ecosystem,” she mentioned throughout the dialogue.

The VC investor quoted above additionally mentioned there can be extra ache for the startup group earlier than issues begin to choose up. “At this level, there was no ecosystem cleanup or repair in India like there was within the US. All of the unicorns that have been made in 2021 are nonetheless there. To this point, the one correction seen has been within the type of layoffs of 10% or 20%,” he mentioned, including: “There will probably be extra earlier than issues begin to choose up.”

Leave a Comment