Funding Paradox: Indian VC’s Raised Over $12.3 Bn In H1 2022, While Startups Face A Funding Winter

The global economic slowdown amidst the ongoing Russian invasion of Ukraine, rising inflation rates and policy rates have turned investor sentiment negative, which has also hit the Indian startup ecosystem.

The Indian startups raised around $19 Bn in funding during the first half of 2022, setting a new record for the best-ever H1 of any year on record. However, in Q2 2022, startup funding fell 37% quarter-on-quarter (QoQ), according to an Inc42 report.

Over the last three quarters, startup funding reduced by more than 53%, sending alarm bells ringing across the country’s startup ecosystem. Many startups failed to raise capital and have either resorted to laying off employees or shutting down altogether, with edtech being the worst-affected sector.

Amidst these testing times, the Indian startup ecosystem saw a surge in mergers and acquisitions, with the M&A deal count reaching an all-time high of 165 in H1 2022, according to Inc42 data.

The first half of 2022 was the second successive half-year to see more than 100 mergers and acquisitions. The biggest acquisitions of the half were Zomato’s acquisition of Blinkit for $570 Mn and Shiprocket acquiring Pickkr for $200 Mn.

However, over the last six months, multiple investors from across the world have announced new dedicated funds for India and the SEA (South East Asian) region, giving hope for a windfall this monsoon season.

A total of 78 funds were launched or announced in H1 2022, with the total funds exceeding $12.3 Bn, as per Inc42 data. Sequoia, General Atlantic, Elevation Capital, and Accel were among those who announced mega funds for India.

For some context, the top 10 funds launched in 2022 account for $8.3 Bn, or almost two-thirds of the total funds announced or launched for Indian startups in H1 2022.

While most of the announced funds are venture capital (VC) funds, there are also several private equity (PE) funds, grants, government funds, debt funds, CVC funds, angel funds and accelerator funds, making for a diverse funding environment for India’s startup ecosystem in the coming months.

Out of the 78 total funds, 57 funds worth around $8.1 Bn have already been launched, with the biggest being Sequoia’s India & SEA fund at $2 Bn.

Inside Funds Launched In H1 2022

Out of the 57 funds launched so far in H1 2022, 37 deal with early-stage startups, with some of the largest funds being the Sequoia India & SEA fund and Elevation Capital Fund VII, among others.

Notably, only two late-stage funds have been launched in H1 2022 so far, with a total value of $500 Mn.

This is reflected in the larger funding trends that are visible. According to the Inc42 report, late-stage funding declined 52% in H1 2022 from H2 2021. At the same time, seed-stage funding increased significantly from H2 2021 as compared to H1 2022.

These trends have also seen major investment firms rehash their strategies for funding Indian startups. Recently, Sequoia announced that its Surge will increase the seed-stage investment ceiling to $3 Mn, from $1-2 Mn earlier.

Incidentally, a significant majority of the funds being launched are venture capital funds so far this year. Out of the 57 funds launched in 2022 so far, almost two-thirds of the total funds are VC funds, accounting for around $7.6 Bn in equity held.

At the same time, 5 corporate venture capital (CVC) funds have been launched, and three angel and accelerator funds each have been launched in 2022 so far.

Top Ten VC Funds Launched In 2022 

Sequoia India Fund (2022): $2 Bn

Sequoia India and Sequoia South East Asia announced the closure of the US-based VC firm’s largest-ever fund for the region. Pegged at $2.85 Bn, Sequoia has reserved $2 Bn only for Indian seed and growth-stage startups, while the rest of $850 Mn will form the first dedicated SEA fund from Sequoia.

The fund’s closure was announced in June 2022, at a time when Sequoia India was struggling with multiple issues within portfolio companies. Even as the funding tumbles, Sequoia’s fund also acts as a statement of trust in India’s startup ecosystem, accounting for almost 17% of all funds launched so far in 2022.

Elevation Capital Fund VII: $670 Mn

Just like Sequoia, Elevation Capital raised $670 Mn for its Fund VII to focus on early and growth-stage startups in India. Having closed Fund VII in April 2022, Elevation will focus on startups in segments such as consumer tech, consumer brands, fintech, SaaS and Web3. 

It is aiming to write cheques between two and five million dollars for startups, which takes the number of startups it will fund to between 134 and 335. It should be noted that Elevation has already invested around $2 Bn in more than 150 Indian startups.

Accel India VII: $650 Mn

After participating in 74 funding deals in 2021, Accel announced the closure of its seventh fund for India, the Accel India VII, at $650 Mn in March 2022. The fund is a clean $100 Mn higher than its India VI and will focus on early-stage startups in the region.

With the latest round, Accel has committed a total of $2 Bn to India’s startup ecosystem, with its portfolio looking pretty with the presence of Flipkart (exited after Walmart bought the ecommerce company in 2018), Freshworks (IPO exit) and unicorns such as Acko, Mensa Brands, Swiggy, Urban Company and Vedantu, among others.

Jungle Ventures Fund IV: $600 Mn

Jungle Ventures closed its fourth fund focused on India, Fund IV, in May 2022 at $600 Mn, making it the fourth-largest VC fund launched in India so far this year. The Singapore-based VC firm said that it will bring a $450 Mn main fund, and the rest $150 Mn will remain as additional managed commitments.

Jungle Ventures said while announcing the closure that it will make around 15-18 investments across startups based in India and Southeast Asia.

Bertelsmann India Investments: $500 Mn

One of the latest fund launches in 2022 so far, Bertelsmann India Investments (BII) closed a VC fund of $500 Mn under Bertelsmann’s Boost 25 strategy. The VC firm will invest in six to eight growth and late-stage startups from the fund. The VC firm will target sectors such as healthtech, enterprisetech, fintech, agritech, deeptech and Web3.

BII will invest between $5 Mn and $20 Mn, while also making follow-on investments of up to $40 Mn in selected startups. BII has already invested over $1 Bn in more than 250 companies and funds to date.

Ganesha: $300 Mn

Japan-based Mitsubishi UFJ Financial Group’s subsidiary MUFG Bank announced that it will invest $300 Mn in Indian startups via its VC fund christened ‘Ganesha’. MUFG already has a debt venture fund called Mars Growth Capital, and Ganesha is the firm’s second fund overall and first VC fund.

MUFG has plans to invest in growth to late-stage startups, generally focussing on fintech, environmental sustainability and renewable energy sectors. MUFG joins Akatsuki Entertainment Technology (AET) Fund, Incubate Fund, Mistletoe and SoftBank as Japanese firms that are investing in Indian startups.

IvyCap Ventures: $261 Mn

Mumbai-based IvyCap Ventures raised $261 Mn towards the first close of its third venture capital fund in February 2022. While IvyCap has a target to increase the fund size, currently there have been no subsequent closes so far.

The VC firm invests in growth-stage startups and has plans to invest in consumer internet, deeptech, healthtech, fintech, SaaS and edtech startups. It will write cheques worth around $4-5.5 Mn for 20-30 Indian startups.

Eight Roads Venture India: $250 Mn

Eight Roads Ventures India announced the closure of its first healthtech-focused fund at $250 Mn in May 2022, taking its total investment in India to $1.6 Bn. The VC firm added that it will make minority investments in 15-20 life sciences, healthtech, consumer health and digital health startups at the early and growth stage.

Eight Roads plans to write small cheques as well as cheques as large as $40 Mn. It already has a portfolio of around 25 startups across healthtech and life sciences, including the likes of Toothsi, Pharmeasy and Doceree, among others.

The Trifecta Leaders Fund – I: $200 Mn

The Trifecta Leaders Fund – I, first launched in May 2021, closed for the second time in early February 2022 at $200 Mn. Trifecta Capital will look to back late-stage Indian startups via the fund. The VC firm is also looking to raise a further INR 375 Cr through a green shoe option.

Trifecta had already deployed half of the fund, investing INR 730 Cr in unicorns such as Dailyhunt, Cars24, Pristyn Care, ixigo, Good Glamm Group, Pharmeasy and Meesho.

South Asia Growth Fund II: $200 Mn

GEF Capital Partners (GEF), an India-focused clean energy investment firm, closed its $200 Mn South Asia Growth Fund II (SAGF II) in March 2022. GEF will focus on climate mitigation, adaptation, circular economy and resource efficiency.

The firm has deployed more than two-thirds of the fund, with investments in Prince Pipes, SeedWorks, Premier Energies, Syrma SGS and 3SC, among others.

Private Equity Funds Launched In H1 2022

General Atlantic: $2 Bn

US-based PE firm General Atlantic announced its plans to invest up to $2 Bn in India and SEA startups over the next two years in May. General Atlantic has already invested in over 440 Indian companies and startups, including the likes of BYJU’S, Unacademy, Acko and Nobroker, among others.

General Atlantic only invested in about five startups last year. However, the PE firm has gone public stating that it was waiting for value creation to happen in the region and will be investing heavily from here on in.

OAKS Consumer Fund: $115 Mn

Only the second PE fund to be announced in 2022, OAKS Consumer Fund is the second fund of OAKS Asset Management, a Mumbai-based PE firm. OAKS closed the fund at $115 Cr (INR 1,000 Cr), at a 30% oversubscription.

OAKS said at the time of the announcement in June that the final closure of the fund will be towards the end of July. The PE firm will use the fund to invest in Indian startups and mid-sized companies.

CVC Funds Launched In H1 2022

Tata Capital: $126 Mn

A PE arm of Tata Capital announced the final closure of a $126 Mn fund to invest in healthcare and pharma startups in India in late March 2022. Called the Tata Capital Healthcare Fund II (TCHF II), the CVC fund saw commitments from global pharmaceuticals and medical equipment companies, among others.

Tata Capital said that around 60% of the fund will focus on domestic healthcare and life sciences startups, while the rest 40% will go to companies focused on healthcare and life sciences competency.

Agri Seed Fund: $25 Mn

Launched by agritech startup Ninjacart in March 2022, the Agri Seed Fund is an agritech-focused fund that will support seed-stage startups in agritech. The Tiger Global-backed startup’s founder Thirukumaran Nagarajan posted a LinkedIn post stating that Ninjacart will seed fund startups in just two days.

Ninjacart launched the startup as a part of its larger attempts to accelerate the development of the agritech sector in the country, Nagarajan told Inc42 back then. According to him, Ninjacart will make seed investments in startups that present “unique, sustainable and tech-enabled solutions”.

CoinDCX Ventures: $12.85 Mn

In May 2022, crypto exchange startup CoinDCX’s investment arm CoinDCX Ventures announced an INR 100 Cr ($12.85 Mn) fund to invest in early-stage crypto and blockchain startups in India. CoinDCX Ventures’ CVC fund aims to accelerate the web3 ecosystem in the country.

It is prudent to note here that CoinDCX Ventures has already invested in Spheron, Taki, EPNS, Liminal, meta ENGINE, Router Protocol and Syndr, among others.

CrazyLabs: $1 Mn

Back in March 2022, mobile game developer CrazyLabs announced that it will be bookmarking $1 Mn in the Indian game development industry. The game developer has added that its CVC fund will aim to invest in early-stage startups in India in the gaming segment.

CrazyLabs did not disclose the average cheque size, the number of startups it will invest in and other details.

Debt Funds Launched In H1 2022

AIF Grand Anicut Fund II: $110 Mn

The first debt fund of the Chennai-based alternative financing firm Anicut Capital on the list, the debt firm closed the AIF Grand Anicut Fund II at $110 Mn in January 2022. The fund will invest in 30 early and growth-stage startups across multiple sectors. The second fund has already backed 15 growth and early-stage startups, with an average deal size of INR 15-100 Cr.

The debt fund has already invested about INR 500 Cr from the total corpus. Anicut Capital has a portfolio of startups such as Wow! Momos, Neeman’s, B9 Beverages (Bira) and Wingreens.

Anicut Capital: $19 Mn

This is Anicut Capital’s second debt fund on the list. The firm raised INR 140 Cr ($19 Mn) from the Small Industries Development Bank of India (SIDBI), via the INR 10,000 Cr Fund of Funds for Startups scheme.

Anicut plans to invest the funds across early and growth-stage startups in sectors including consumer brands, technology, F&B and fintech, among others. The Chennai-based AIF has two total funds under management so far.

Accelerator Funds Launched In H1 2022

9Unicorns Accelerator Fund: $100 Mn

Mumbai-based startup incubator 9Unicorns announced the fifth closure of its first-ever accelerator fund at $100 Mn. 9Unicorns claims that it has already invested in more than 110 idea and product startups across early and growth stages.

The accelerator fund has plans to invest $500K to $1 Mn in the idea stage, and up to $2 Mn in Series C and above startups during the rest of 2022. 9Unicorns will keep its focus on deeptech, enterprise SaaS, Web 3.0, fintech, media, insurtech, healthtech, edtech and D2C startups.

Real-Time Accelerator Fund: $12.9 Mn

The parent company of Gurugram-based Startup Buddy launched the Real-Time Accelerator Fund with a corpus of INR 100 Cr ($12.9 Cr) with a greenshoe option of another INR 100 Cr in May 2022. The fund will invest in 20 startups in a year with an average cheque size of INR 1 Cr. The accelerator fund will also handhold the startups it backs in its 10-week accelerator program.

The Real-Time Accelerator Fund will invest in seed-stage and early-stage startups. The accelerator fund will focus on startups working in finance, legal and compliance services.

Upekkha’s UP Funds: $9 Mn

In February 2022, Upekkha, a SaaS startup accelerator, raised $9 Mn from WestBridge Capital for its UP Funds. The UP Funds claims to help startups through early-stage bottlenecks and provide them with funding.

Last year, Upekkha invested around $100K-200K in 10 SaaS startups. It will continue to invest in early-stage startups, with a target to invest in 60 startups across three different cohorts of the Upekkha accelerator program.

Government Funds Launched In H1 2022

SSIP 2.0: $65 Mn

A startup fund set up by the Gujarat government’s climate change department, the Student Startup Innovation Policy 2.0 (SSIP 2.0) was announced in March to invest in startups working in cleantech. Under the initiative, the climate change department will focus on climate change startups contributing to society.

According to the Gujarat government, it will invest up to INR 2.5 Lakh at the ideation or proof of concept stage, while startups at advanced stages, offering products or services, will be eligible to receive up to INR 10 Lakh in seed funding. For eligibility, startup founders need to be under 35 years of age.

Maharashtra Innovation and Technological Development Fund: $25.6 Mn

In June 2022, the Maharashtra government announced that it will set up a women-focused fund to invest in early-stage deeptech startups. The fund, worth INR 200 Cr, or around $25.6 Mn, will focus only on deeptech and other ‘socially relevant startups’ led by women entrepreneurs.

Apart from the Maharashtra Innovation and Technological Development Fund, the state government is also looking to launch a seed fund for startups, but the details on that have not been made public so far.

State Startup Hub: $9.8 Mn

The Tamil Nadu government announced in March 2022 that it will be setting aside INR 75 Cr (around $9.8 Mn) to establish a State Startup Hub in Chennai. Besides, the Tamil Nadu government also allotted about INR 50 Cr to the Emerging Sector Seed Fund to invest in state-based startups.

The State Startup Hub will be established by the Tamil Nadu Industrial Development Corporation and will help startups in the state with multiple aspects such as funding support, regulatory support and so on.

India WaterPitch-Pilot-Scale Startup Challenge: $26,000

Launched as a startup challenge by Union Minister Hardeep Singh Puri on March 12, the India WaterPitch-Pilot-Scale Startup Challenge aims to empower around 100 startups in the water sector. If selected, the startups will receive a grant of INR 20 Lakh ($26,000) each.

The Ministry of Housing and Urban Affairs said in a statement, “The initiative aims at empowering startups in the water sector to grow through innovation and design that will drive sustainable economic growth and generate employment opportunities.” The scheme will further ensure water security, added Puri.

Other Funds Launched In H1 2022

Supply Chain Labs: $9.8 Mn

The only fellowship fund launched so far in 2022, Supply Chain Labs (SCL), an initiative by investment firm Lumis Partners, TCI Ventures, among others, closed its fellowship fund worth INR 75 Cr in February 2022. The fund will remain focused on supply chain startups and fund the same.

According to Supply Chain Labs, the fund will select 50 supply chain startups and invest as much as INR 7.5 Cr ($1 Mn) in the same. The fund is part of its third cohort, and SCL already has invested in around 19 startups across its first two cohorts.

Amesten Capital: $9 Mn

A Mumbai-based Web3 and crypto-focused investor, Amesten Capital raised $9 Mn and set up a new fund. The new fund will focus on gaming space, decentralised (DeFi) finance, and infrastructure. The fund, which was launched in April 2022, will focus only on seed-stage startups in the aforementioned sectors.

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