Indian Startup Funding Plunges 58% In September 2022

The funding decline in the Indian startup ecosystem continued in September 2022 as well, as Indian startups managed to raise only $810 Mn, a 58% year-on-year (YoY) fall.

Indian startups raised significantly less in September compared to the start of 2022. Starting from $4.6 Bn in January 2022, Indian startup funding has reduced by 82% over the nine months. The amount raised in September 2022 was lower than not only September 2021 ($1.9 Bn) but also September 2020 ($2 Bn).

Interestingly, the number of deals also plummeted in September to 105, having declined 46% compared to the deals in January 2022.

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Worryingly, none of the startups in India managed to secure a mega deal – a round worth more than $100 Mn – in September. The largest funding round in September 2022 was the $82-Mn round of EV startup Yulu. In comparison, August saw three mega deals and while July accounted for one mega-deal.

In terms of stage-wise trends, funding decreased across all stages except the growth stage, which increased marginally.

However, as has been the general trend throughout 2022, late-stage funding took the biggest hit, falling 78% as compared to September 2021.

During the month, fintech startups managed to secure the most investment at $173 Mn. Ecommerce and enterprisetech were the other sectors with a funding amount of more than $100 Mn. 

Incidentally, enterprisetech saw the most funding deals at 28, while ecommerce accounted for 22 funding deals in September 2022. There were 16 fintech deals in September 2022. 

In terms of startup hubs, Bengaluru took its spot back as the top startup hub from Mumbai, with Bengaluru-based startups raising $285 Mn, slightly higher than $241 Mn raised in August 2022.

Mumbai slid to the third spot with $92 Mn, having secured pole position in August 2022 with $585 Mn. Delhi NCR rose to the second spot, with the startups based in the region raising $251 Mn in September 2022.

The funding winter has well and truly set in for the Indian startup ecosystem. The headwinds caused by adverse geopolitical and macroeconomic conditions have brought the focus on business models, corporate governance and positive unit economics. As the situation continues to develop across various parts of the world, it has become difficult to predict long-term trends.

However, investors are wary of writing big cheques, and that has resulted in a big fall in late-stage funding. On the other end of the spectrum, early-stage funding is flourishing. Investors in Indian startups are looking to bet on ideas that would pay dividends in the future, avoiding high cash burn business models in the process.

While these factors are set to impact startup funding for a while, it would be interesting to see how startups cope with it.

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