April-June sees 40% decline in start-up funding in India: PwC report

Geo-political instability appears to be taking a toll on the Indian start-ups with the total funding declining by 40% to $6.8 billion in the April-June quarter, as per a PwC India report.

News agency PTI, quoting the PwC India report, said that the early-stage deals comprised more than 60% of the total with an average ticket size of $5 million, as per the PwC India report titled, 'Startup Deals Tracker - Q2 CY22.'

"After three consecutive quarters of raising more than $10 billion, the total funding in the Indian start-up ecosystem fell by 40% during Q2 CY22 to reach $6.8 billion. The decline can be attributed to a global slowdown, decrease in tech stock valuations, inflation and geopolitical instability," the PwC report said.

As per the PTI, the PwC report said that Software as a Service (SaaS) and fintech companies had the highest share of funding in the second quarter of Calender Year (CY) 2022, totalling more than $3.1 billion.

It further said that early-stage deals comprised more than 60% of the total deal volumes with an average ticket size of $5 million.

Funding in early-stage deals during Q2 CY22 continued to be stable at around $800 million and could remain stable or even grow in the next few quarters -- given that entrepreneurial activity continues to flourish with increased digitisation as well as the quantum of venture capital funds waiting to be deployed in the Indian market, it added.

"We expect the overall funding landscape to take 12-18 months to stabilise, during which it would be beneficial for start-ups to increase their 'funding runway'. No matter which stage a start-up is in, they would do well to keep a close tab on core business and ensure unit economics is strictly as per plan," said Amit Nawka, Partner - Deals and India Start-ups Leader, PwC India.

Valuations are likely to remain under pressure across all funding stages, primarily trickling down from the significant funding slowdown in late-stage or Initial Public Offering (IPO) deals, he added.

The report further said Bengaluru, National Capital Region (NCR) and Mumbai continue to be the key start-up cities in India, together contributing around 95 per cent of the total funding activity in April-June quarter of 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 Observe.ai -- majorly across the SaaS, and logi and autotech space.

In NCR seven companies -- Delhivery, Stashfin, Rario, Grey Orange Robotics, Absolute Foods, Fashinza and PhysicsWallah -- raised more than $100 million each.

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

Only four start-ups in India attained unicorn status in the second quarter of calendar year 2022, mirroring a global trend in decline in the number of new unicorns this last quarter. Globally, the total unicorn count has crossed 1,200 with maximum unicorns in Q2 CY22 operational in the SaaS sector, followed by fintech.

The number of decacorns (start-ups valued at $10 billion) globally has reached 57, with four new entrants in April-June quarter of 2022.

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