State of Indian startup ecosystem in September: Squeezed
Startup funding fell 16.5% in Sept, compared to 66.1% rise in August, elevating funding winter fears with 69.9% fall from $3.01 billion in Sept. 2021.
The testing times of the Indian startup ecosystem seem to remain endless through the second half of 2022, as funding activity is witnessing major swings after 2021 - the year of startups and unicorns - recorded a fundraise of $32 billion across 1,406 deals.
Following a gloomy July and stretched August, Indian startups raised a little over $905 million across 137 funding deals during September. According to YourStory Research, compared to August’s relatively better fundraise of $1.08 billion, across 135 deals, the latest month gone by has registered a 16.5% monthly decline in fundraising.
August celebrations this year were short-lived because of a 67.9% annual decline in comparison to $3.38 billion (141 deals) raised in August last year. The September 2022 fundraising is a little over 69.9% lower than $3.01 billion (161 deals) that startups raised during the same month last year.
Together, these factors give us stronger reasons to reiterate on our earlier analysis of startup funding, where we had warned that the coming quarters would be an acid test for the ecosystem. This claim can further be cemented by the fact that the latest month registered a 76.5% decline in monthly funding compared to January 2022-the best month of 2022-when $3.85 billion were raised across 183 deals.
Out of $19.7 billion raised during the first nine months of 2022, the share of September stands close to 4.6% leaving July ($652.7 million; 116 deals) at the bottom with 3.3% share. The first three months of 2022 grabbed the top three spots with 19.5%, 16.5%, and 14.8% share due to respective fundraising of $3.85 billion (183 deals), $3.25 billion (144 deals), and $2.92 billion (155 deals) during January, February, and March respectively.
The monthly dip in September has been seen across all stages except the growth stage which saw 15% increase at $580.7 million compared to $505.2 million in August. In contrast, there was a monthly dip in debt financing, early stage, and late stage at 86.5%, 4.7%, and 73.0% respectively. Compared to August, fundraising in the respective stages fell from $30.3 million, $252.5 million, and $296.2 million to $4.1 million, $240.6 million, and $79.8 million in September.
From the funding round types' standpoint, only Series B and C saw a monthly increase of 150.7% and 52.0%, at $262.4 million and $79.1 million, compared to $104.7 million and $52.0 million in August. Whereas Pre-series A, Series A, Series D, and deals where the round type was undisclosed saw respective declines of 17.1%, 33.7%, 78.9% and 27.5% during September.
In terms of the top sectors, fintech and financial services accounted for 16.2% of the September total with 22 deals raising $146.3 million, followed by healthtech and healthcare services’ 15.1% share ($137.1 million; 11 deals) and 9.7% share of logistics and supply chains ($87.9 million; 4 deals).
Compared to a year ago, the top three sectors mentioned above recorded an annual decline of 70.2%, 42.8%, and 57.6% against $492.2 million (30 deals), $239.7 million (19 deals), and $207.3 million (7 deals) respectively raised in September last year.
Overall, during September 2022, the top five sectors accounted for close to 55.8% of the monthly total while the top 10 accounted for 78.4%. In contrast, the top 5 and 10 sectors accounted for 65.3% and 90.8% of the monthly total of $3.01 billion raised in September last year.
When seen through the lens of cities which are home to the startups funded during September, Delhi NCR-with $334.0 million raised across 44 deals-had an absolute lead of 48.1% and 148.7% each over Bengaluru ($225.6 million; 37 deals) and Mumbai ($134.3 million; 29 deals).
While Delhi NCR, Bangalore, and Mumbai respectively accounted for 36.9%, 24.9%, and 14.8% of the monthly total, Verna-the industrial town of Goa which is home to , the healthtech startup which is the latest to have joined the Unicorns of India club-accounted for 9.4% of the monthly funding. Verna was followed by Hyderabad with 7.7% share owing to $70.1 million raised over 7 deals.
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Edited by Akanksha Sarma