Indian Startup Funding Tanks 42% QoQ To $6.8 Bn In Q2 2022

SUMMARY

The deal count also fell 22% to 393 in Q2 CY22 from 507 in Q1 CY22

On a year-on-year (YoY) basis, the funding raised was 1% higher than $6.1 Bn raised in Q2 CY21

The ongoing Russia-Ukraine war, rising inflation and policy rates, and fears of an impending recession have translated into lower funding for startups

Amid the funding winter, the total funding raised by Indian startups in the second quarter of 2022 (CY22) plummeted by a massive 42% to $6.8 Bn from $11.8 Bn in Q1 of the year.

The deal count also fell 22% to 393 in June quarter of CY22 from 507 in March quarter. The ongoing Russia-Ukraine war, rising inflation and policy rates, and fears of an impending recession have translated into lower funding numbers for startups.

However, the funds raised by the startups in June quarter rose 1% year-on-year (YoY) compared to $6.1 Bn raised in Q2 CY21. The deal count was also higher by 25% as compared to 313 deals in June quarter of 2021.

It must be noted that the total funding raised by Indian startups had registered a 48% quarter-on-quarter increase in June 2021 quarter.

QoQ Decline From Q1 2022

The decline in funding was visible since the first quarter of 2022. The funds raised by Indian startups declined to $11.8 Bn in March quarter of 2022 from $14.5 Bn in preceding December quarter of 2021.

The funding lost steam from the month of March. While Indian startups raised $4.6 Bn in March, it declined over 26% to $3.4 Bn in April. The decline continued in May, with a month-on-month fall of 52% to $1.6 Bn in funding across 117 deals.

Meanwhile, the Indian startup ecosystem got four new unicorns in the June quarter of 2022. While April contributed one unicorn in the form of neobank Open, May churned none. The month of June, however, saw three startups joining the coveted unicorn club – PhysicsWallah, Purplle and LeadSquared.

The decline in funding and high cash burn has forced many startups to retrench employees. The cost-cutting measures have resulted in startups firing more than 11,160 employees in 2022 so far.

An Inc2 report also estimated that close to 63% of Indian investors are ‘pessimistic’ about the economic downturn that has gripped the globe. However, an overwhelming majority of investors, 90.2%, said that they would not reduce investments in the Indian startup ecosystem.

The report also noted that close to 40% of the investors are now looking to increase due diligence and scrutiny amid rising instances of corporate governance issues with homegrown startups and ongoing economic downturn.