Tracxn, a global market intelligence platform, has released its ‘Tracxn Geo Annual Report: India Tech 2022.’ The report provides a detailed overview of the Indian startup ecosystem, funding activities, investor exits through acquisitions and IPOs, and wider trends in the fundraising landscape.
According to the report, in 2022, Indian startups have raised a total of $24.7 billion in funds to date, which is 35% lower compared to the same period in the previous year ($37.2 billion). “The significant drop in funding is attributed to a decline in late stage investments, which fell by 45% from $29.3 billion in Jan-Nov 2021 to $16.1 billion for the same period in 2022. Seed stage rounds are currently also experiencing a contraction and have dropped by 38% as compared to the previous year,” the report added.
The number of big ticket ($100+ million) funding rounds has also dropped by 35% to 55 in 2022 as compared to 85 in the same period last year.
Top Performing Sectors
-This year saw enterprise applications, fintech and retail emerge as the top performing sectors in terms of funding.
-Despite receiving more investor attention compared to startups in other sectors, fintech and retail are not adverse to the effects of the funding slowdown and have seen a drop in funding of 57% and 41% respectively compared to the same period last year.
-Edtech is another sector that has seen a significant drop in 2022, with its funding falling by 39% compared to the same period last year. The sector has been facing a decline in demand since schools and colleges started reopening after the pandemic, forcing many players to lay off their workforces to reduce operational costs.
Other aspects highlighted in the report include 22 startups entering the unicorn club ($1+ billion valuation) as compared to 46 in the previous year, 11 exits occurring through IPOs, the city of Bengaluru leading the maximum total funding raised.
Speaking on the launch of the report, Neha Singh, Co-Founder, Tracxn, said, “Rising interest rates and fears of global recession have led to investors becoming more risk-averse, continually slowing down the funding momentum in the Indian startup ecosystem. The funding winter, which began in Q4 of 2021, will persist in 2023 as well. In order to survive the drought, startups are taking unit economics more seriously, which has been illustrated through the series of mass layoffs that have occurred this year. Although we are currently experiencing a slump, the situation is prompting startups to establish clearer and more sustainable paths to growth, as investors’ evaluation metrics begin to emphasise good profitability over growth at all costs.”