Startup Funding in India Drops 33% To $24 Billion in 2022: PwC Report

The startups, however, received more than twice the funds raised in 2020 and 2019.

New Delhi: Indian startups received nearly $24 billion in 2022 – a 33% fall from the nearly $37 billion they raised in 2021, a report showed on Wednesday, January 11.

According to the PwC India report, titled ‘Startup Tracker-CY 22’, the startups, however, received more than twice the funds raised in 2020 and 2019.

A similar report was released by market intelligence platform Tracxn in December.

The report attributed this decline to the rising interest rates and fears of a global recession that have made investors more risk-averse, which is, therefore, leading to a continuous slowing down of the funding momentum in the Indian startup ecosystem.

News agency IANS reported, citing the PwC India report, that early-stage deals, in volume terms, accounted for 60-62% of the total funding in 2021 and 2022. The average ticket size per deal was $4 million.

Growth and late-stage funding deals, in value terms, accounted for 88% of the funding activity in 2022. The average ticket size in the growth-stage deals was $43 million and in late-stage deals was $94 million in 2022.

The software-as-a-service (SaaS) segment accounted for nearly 25% of all funding activity, it said. In fact, it saw an increase of 20% in funding values during 2022 as compared to 2021.

At least 21 startups entered the unicorn club in 2022, the highest from the SaaS category, followed by fintech. A unicorn has a valuation of over $1 billion.

Media and entertainment also saw a rise in funding activity in 2022, the report added.

“Media and entertainment showed an increase in the funding activity by 6% during CY22 compared to CY21. Dailyhunt raised nearly $890 million in CY22 which contributed to 55% of the funding in this sector during the year,” the report said.

However, the number of new unicorns halved in 2022 to 21 from 42 in 2021, Business Standard reported.

The e-commerce business-to-consumer category saw the steepest decline in funding at 71% and EdTech at 54% during 2022, the report said.

TechCrunch reported in October 2022 that the funding crunch appears to be more acute in India. Masayoshi Son, the founder of SoftBank, had warned in August last year that the funding winter may continue for longer, globally, because some unicorn founders are unwilling to accept lower valuations. In December, he had said he invested more than $3 billion in India and was the provider of capital for about 10% of unicorns, including PayTM, Policybazaar, Unacademy, Grofers and Oyo.

In the Indian startup ecosystem, Byju’s, the country’s most valuable startup, has postponed its plans to go public this year. The company has come under fire for accounting irregularities, alleged mis-selling of courses, and mass lay-offs.

SoftBank cut Oyo’s $10 billion valuation to $2.7 billion last year, the news outlet reported.

Bengaluru, Delhi-NCR, and Mumbai account for nearly 82% of total Indian startups.

“With significant dry powder waiting to be invested, it seems likely that the funding scenario will begin to normalise after 2-3 quarters. Until then, however, many startups are using this time to tighten operating models and optimise their cash runway by deferring discretionary spends and investments,” Amit Nawka, partner of deals and India startups leader at PwC India, told IANS.