Funding chill: Startup deals at 9-year low

Just one startup received funding every 10 hours during the month, compared with the peak just about a year ago when it happened every three hours, showed data collated by VCCEdge, the data research platform of VCCircle.

Between 100 and 150 startups on average received angel investments and venture capital funding every month over the last eight calendar years.

In 2022, even as investors tightened their purse strings after the public market re-rating of technology companies in the West, on average, more than 120 ventures received funding every month.

To be sure, most of the deals announced in the recent past were sealed months after they were formally negotiated. This shows that how despite growing concerns about valuations, startup deal volumes remained robust at more than 180 in the first quarter of 2022.

Although the scenario turned uncertain thereafter, barring one or two months, 2022 managed to record on average, more than 100 deals every month.

The new year began on a slow note, but deteriorated last month, showed the early data compiled by VCCEdge.

While the big cheques of 2021 had all but disappeared last year, angel and seed-stage activity remained buoyant. This helped arrest the decline in the total number of startups receiving funding even as the total value of investments sank sharply last year.

But, this, too, seems to be flagging now as per the last data.

Last month, just 66 Indian startups raised a combined $471.6 million. There have been a few months in the past when the total funding value was lower than this, but deal volumes remained strong.

In terms of funding value, February is the lowest since July 2020. Last month’s total deal value was propped up by fish and meat e-tailer FreshtoHome, which accounted for over a fifth of the total money.

Meanwhile, February deal volumes was the lowest since June 2014, the first month under Prime Minister Narendra Modi-led government, which saw 65 deals. The government had been pushing startup activity in the country as a big win over the last few years.

Concerns over sky-high valuations during 2021 when India crossed the milestone of having 100 unicorns, or startups with a valuation of $1 billion or more, grew as tech peers in the developed markets got re-rated, and had a domino impact on tech ventures in the country.

As investors turned cautious, several startups have been facing a severe financial crunch. This has led to belt-tightening measures, including layoffs. Many others had to shut operations or were forced to merge with their peers.