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Photo: iStockphoto

Startup funding down 29% in first half of 2020: Tracxn

Only 443 startups were funded in the January-June period this year against 725 in first half of 2019

Startup funding dropped by 29% in the first six months of 2020 to $4.2 billlion compared to $5.9 billion in the corresponding period last year, due to the impact of the coronavirus pandemic, according to data by venture capital industry tracker Tracxn.

Only 443 startups were funded in the January-June period this year against 725 in H1, 2019. This year also put the spotlight on certain sectors like alternative lending, payments and test preparation tech and generated a lot of interest and funding from investors, according to Tracxn.

While funding in the startup ecosystem was impacted by the covid-19 crisis and the overall economic uncertainty, the restrictions put on direct investments by Chinese investors into Indian companies may put an immediate freeze on funding, impacting small and large internet firms alike.

Even as the economic situation worsened, some startups however managed to raise significant funding this year.

Test preparation tech startups saw the biggest jump in funding with 821 firms raising $666.2 million, up 538%. Ed-tech startup Byju's raised about $100 million from Mary Meeker’s technology fund Bond, taking the valuation of the start-up to $10.5 billion. It had earlier in the year raised $200 million from Tiger Global. The new funding makes Byju’s the second most valued startup in India.

Startups like Sachin Bansal’s Navi, Lendingkart and InCred dominated the alternative lending segment that saw a total funding of $704.5 million, up 67%.

In the Mom & Baby Care segment, 531 start-ups managed to raise $327 Mn, up by 3031%. In 2019, there were no start-ups in this segment that raised funding.

In the payments segment, 989 companies, including Paytm, Pine Labs and Billdesk Overall, raised $347.7 million, down 37% from the first half of 2019.

Three startups – FirstCry, Nykaa and Pine Labs- entered the unicorn club this year compared to six last year. Unicorns are startups with a valuation of 1 billion and above.

Sequoia Capital and Accel were the top venture capital firms, while Steadview Capital and FMO were the top private equity firms in H1'20.

VC investors have been warning startups to control costs and avoid expansion in a bid to boost profitability.

On Tuesday, Sequoia India said it has received commitments worth $1.35 billion from limited partners for two new India- and South-East Asia (SEA)-focussed funds—a $525-million venture fund, and a $825-million growth fund.

“We are excited about the depth of opportunities in this region, which is undergoing a massive technology-led transformation. The startup ecosystem in both India and SEA has come a very long way in the last few years; the market gets deeper and the crop of founders, and their achievements, becomes more impressive each year," said Shailendra J. Singh, managing director, Sequoia Capital (India) and SEA, in a blog post.

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