Funding for Indian start-ups fell by US$24 billion in calendar 2022, a 33 percent drop compared to 2021, but was still more than double the funds raised in 2020 and 2019 .
According to a report by PwC India, early-stage funding grew by 12 percent compared to 2021, showing that despite the global slowdown, investors are still positive about the Indian start-up ecosystem. In addition, the SaaS segment saw a 20 percent increase in financing values in 2022 compared to 2021 and accounted for almost 25 percent of all financing activity in 2022.
Early-stage deals accounted for 60 to 62 percent of total funding in 2021 and 2022 (in volume terms), the report said. The average ticket size per deal was $4 million per deal. By value, early-stage transactions contributed about 12 percent of total funding in 2022, compared to nearly 7 percent in 2021 (by value). These accounted for 38 percent of the total number of deals. The average ticket size for growth-stage deals in 2022 was $43 million and for late-stage deals was $94 million,” PwC said.
Amit Nawka, Partner – Deals & India Startups Leader, PwC India said: “Despite the funding slowdown, some areas such as SaaS and early-stage funding have remained bullish. With significant dry powder waiting to be invested, it seems likely that the funding scenario will start to normalize after 2-3 quarters. Until then, however, many startups are using this time to streamline operating models and optimize their liquidity by deferring discretionary spending and investments.”
According to PwC India, 2022 saw a 17 percent drop in M&A deals compared to 2021 in terms of transaction volume, with 60 percent of transactions contributed by the top three sectors – SaaS, eCommerce + D2C and EdTech became . E-commerce and D2C (61) and SaaS (60) recorded the most M&A transactions in 2022.
In terms of urban seed funding, Bengaluru, NCR and Bombay account for almost 82 percent of all Indian start-ups in December 2022. “28 percent of startups in the top 3 cities have raised more than $20 million. Bengaluru recorded the highest number of unicorns, followed by NCR and Mumbai. Similar trends have been noted for other companies that have raised more than $50 million to $100 million,” it said.
Bengaluru received $679 million in seed funding and NCR $466 million.
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