SUMMARY
Indian startups recorded total funding of $3.42 Bn in the quarter ending March 2019
The total investment inflow in growth stage ventures was $1.4 Bn in Q1 2019
The funding for Ecommerce sector recorded a negative growth rate of -6.72%
In the first quarter of 2019, the Indian tech startup ecosystem recorded a total funding of $3.42 Bn across 174 deals. Even though that is an increase in absolute terms,, it’s a mere 5.36% growth from $3.24 Bn recorded in the previous quarter (Q4 2018). Though when seen from a Y-o-Y perspective and compared to Q1 2018, the total funding in Q1 2019 grew by 39% from the recorded $2.46 Bn.
While from that lens, the growth in the Indian startup ecosystem is a good omen, the reality is that the top five most-funded startups — which make up a mere 3.06% of the total number of startups funded this quarter — contributed 43% to the total $3.42 Bn raised in Q1. These included Ola ($502 Mn), FirstCry ($396 Mn), Delhivery ($350 Mn), CarDekho ($110 Mn) and PhonePe ($107 Mn).
As far as mergers and acquisitions are concerned, a total of 34 deals were recorded in the first quarter of 2019. Out of the total M&As pool, 49% was contributed by enterprise tech, consumer services and edtech combined.
In our latest report, “Indian Tech Startup Funding Report: Q1 2019” we have highlighted the major trends which were observed across stages and sectors in the Q1 2019 in the Indian startup ecosystem. Here’s a sneak peek:
Growth Stage And Bridge Funding Reach Historical High
With a total investment inflow of $1.4 Bn and $28 Mn at growth stage and bridge funding respectively, these two stages recorded a historical high in their quarterly funding amount, based on data recorded since 2014. In the case of the growth stage startups, the funding amount of $1.4 Bn recorded in the first quarter of 2019 is 68% higher than the $821 Mn recorded in Q4 2018. From a Y-o-Y perspective, that figure is a massive 141% increase from the $574 Mn recorded in Q1 2018.
For startups that received bridge funding, the total funding amount in Q1 2019 stood at $28 Mn, which is only 3.63% higher than the amount recorded in Q1 2018 ($27 Mn), but 184% higher than the $9.86 Mn from Q4 2018.
In the case of growth stage investments, the top funded ventures were Phonepe, which secured $107 Mn from its parent company Flipkart, followed by Ola Electric which received a total investment of $56 Mn from Sachin Bansal. Other prominent growth-stage investments included Zolo Stays, which raised $30 Mn from Nexus Venture Partners, Scripbox with the $21.4 Mn funding from Accel Partners and others, and agritech startup WayCool which got an investment of $16.9 Mn from Northern Arc, LGT Impact Ventures and others.
The massive quarterly gain in bridge funding amount is largely thanks to the rising cloud kitchen star InnerChef, which raised $6.5 Mn from Mistletoe, DAS Capital and others, though Bonito which secured $6.3 Mn from Tomorrow Capital was close behind it. Further DeHaat with the $4.3 Mn investment from Omnivore Partners and AgFunder and Aibono which secured $2.5 Mn from 3one4, Artha India Ventures and others, propped up the bridge funding growth.
Funding Slow Down Evident in the Indian Ecommerce Sector
India’s ecommerce sector is the shining beacon in the startup ecosystem and has also been the highest funded sector for five consecutive years, from 2014 to 2018 It recorded a total investment inflow of $958 Mn in this quarter, which is 51.56% higher than the ecommerce funding benchmark amount (the quarterly average funding from 2014 to 2018) of $632 Mn.
But the sector also recorded a negative CAGR of -6.72% which indicates diminishing investor confidence in the sector. Overall, the ecommerce sector has recorded a total funds infusion of $13.60 Bn from 2014 to 2019(Q1).
This can be linked to the cash-intensive nature of this business which results in high operational cost. But it’s also due to the cloud of uncertainty from the National Ecommerce Bill, which has driven down investor confidence even further. The bill could be catastrophic for many startups as it proposes to end strategic partnerships between sellers and marketplace platforms, in a bid to provide a level playing field for smaller vendors who are joining the ecommerce revolution. Given that such strategic partnerships have resulted in a slew of discounts and cashback offers on ecommerce platforms, which have in turn driven up ecommerce fortunes, the bill could result in a downturn for ecommerce companies.
Within the ecommerce sector, the top five most-funded ventures in Q1 2019 were
FirstCry with $396 Mn in total funding, followed by Truebil with a total of $14 Mn in investment, Clovia ($10 Mn), Zetwerk ($9 Mn) and furniture rental startup Furlenco which raised a total of $5.84 Mn.
BYJU’s Spearheads Edtech Funding Trend in Q1-2019
After a mammoth growth in edtech funding in Q4 2018, the first quarter of 2019 witnessed a decline in funding for this sector by 85%.
Over Q4 2018 and Q1 2019, BYJU’s had a massive funding round of $540 Mn and $42.4 Mn respectively, which was the primary reason for the rise in funding for the edtech sector. While in Q4 2018, BYJU’s contributed 91.69% to the total edtech funding, in Q1 2019 its contribution stood at 48% of the total $89 Mn invested in the sector.
The Most Active VCs and Angels In Indian Tech Startups
Sequoia Capital turned out to be the most active VC in Q1 2019, participating in 12 funding deals. The second spot was taken up by Blume Ventures and Matrix Partners with 8 deals each, followed by Accel Partners India with participation in 6 deals.
In the case of Angel investors, VC Karthic, Sharan Agarwal and Sachin Tagra were the leaders with participation in 8 deals each
Looking at these trends, it can be surmised that funding in sectors such as fintech, media and entertainment, and transport tech will rise due to favourable market conditions, whereas the cash-intensive sectors such as ecommerce, hyperlocal and deeptech will continue to struggle in 2019.
These trends and a plethora of other data-driven insights from innovative startup sectors such as online gaming, fintech, transport tech and deeptech are part of the Inc42 DataLabs’ Indian Tech Startup Funding Report — Q1 2019.
Ad-lite browsing experience