[Weekly funding roundup July 29-Aug 4] VC funding lowest since January 2018

Venture capital funding into Indian startups reached a new low of $11 million for the first week of August. This is the lowest capital raise on a weekly basis in the last five-and-half-years.

According to YourStory Research, the weekly VC funding has never dipped this low since January 2018. The first week of August saw only nine transactions, with the highest amount raised by a startup being just $5 million. In comparison, the previous week saw venture funding of $102 million.

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Such an insignificant capital inflow is a sign of tough times for the Indian ecosystem as startups find it challenging to raise funding. Even if they sign the term sheet, the closure of the transaction is taking a longer time due to governance checks by investors. As far as large deals are concerned, these have become very few and far between.

Given this bleak environment, the chances of a revival happening in the remaining months of the year look distant, with steady and sustained VC inflow now expected only from the next year.

Even though the sentiment is downcast, there are still a few bright spots for the Indian startup ecosystem. One is the financial performance of Zomato for the first quarter of FY24 as it reported a profit for the first time, with its stock price rising by 10%.

There is now a sharper focus on how startups run their operations, with a thrust on profitability rather than just revenue growth.

At the same time, VC funds continue to raise fresh capital which is going to be infused into the startup ecosystem in the coming months and years. This week saw the likes of pi Ventures and Elev8 Venture Partners making closures of their funds.

Key transactions

Unstop, a community engagement and hiring platform for students and graduates, raised $5 million from Mynavi, Coursera, Venture Catalysts, 9Unicorns, and Caret Capital.

FincFriends Private Limited, a captive NBFC of RupeeRedee, raised $3.5 million from Digital Finance International.