The sudden imposition of the lockdown and mass social hysteria among consumers left millions of businesses reeling in the past six months, leaving a $320 Bn dent on the Indian economy. In the context of the Indian startup ecosystem, this market uncertainty made investors wary about making new investments in startups. The widespread cash crunch and cost-cutting measures to extend runways led to massive layoffs at Indian startups.
As people adapted to the new normal, however, so did the Indian startup ecosystem. Compared to Q2 2020, both the funding amount and deal count recovered by 167% and 46% respectively. However, the funding amount still remains 32% lower compared to Q1 2020, whereas the deal count was 25% higher in Q1.
The recovery in this quarter can largely be attributed to sectors such as enterprise tech, media & entertainment and fintech which combined accounted for 58% of the total $2.8 Bn funding and 39% of the total deal count (261).
When compared to Q3 2019, both the funding amount and deals in Q3 2020 remained relatively low, indicating the adverse impact of the pandemic on startup investments in 2020.