Winter is here for start-ups and it's not going away
What's the story
We have been hearing about India's tough start-up landscape. Now, we have figures to support that. According to a report by PwC India, the funding in Q3 stood at $2.7 billion, 80% less than the previous year. This is the lowest in the last two years. The funding trend in India is a mirror image of what's happening all over the world.
Context
Why does this story matter?
It is start-up funding winter in India. If you didn't believe it before, the Q3 numbers will certainly hit the nail on the head. After riding the bull for so long, this crunch environment might feel new for most start-ups. What's worrying is that they may have to get used to it, as the funding crunch will stay put for a while.
Quarterly report
Only 2 start-ups attained unicorn status in Q3
Start-up funding in India in Q3 CY22 saw a 57% decline from the previous quarter. There were 205 completed deals in the quarter. The decline in valuations has increased the number of mergers and acquisitions in India. There were 38 M&As with start-ups involved. In the quarter, only two start-ups attained unicorn status. Funding rounds also went down from 674 to 334 year-over-year.
Stages
Early-stage start-ups accounted for 70% of funding volume
Early-stage start-ups felt the least bit of crunch in the third quarter. They contributed 21% of the total funding, while late-stage start-ups accounted for 79% of the funding. In volume terms, early-stage start-ups accounted for 70% of total funding compared to 60% from the previous quarter. An increase in funding for early-stage start-ups can be attributed to the lack of risk present.
Worrying
Global start-up funding has declined by 57% year-over-year
The funding crunch can be found in the global start-up scene as well. Internationally, the funding was down 33% quarter-over-quarter and 57% year-over-year. Investors have become cautious about spending their money. As a result, start-ups are finding it hard to raise sums around the world, especially at a valuation higher than that of the previous rounds.