Startup funding drops by 80% YoY to $3 bn in Q3 of Calendar 2022: Tracxn

Average ticket size also dips across all funding stages, late-stage sees biggest fall of 70%, indicating that investors aren't willing to make large investments until economic conditions improve

Indian startups raised $3 billion in Q3 2022 (July-Sept), which was 57 per cent lower as compared to the previous quarter, according to a new report by Tracxn, the technology-led market intelligence platform.

“Q3 2022 witnessed $3 billion in funding, which is 57 per cent lower from Q2 2022 and 80 per cent lower than the peak funding of $14.9 billion received in the same quarter last year," according to the ‘Tracxn Geo Quarterly Report: India Tech Q3 2022’.

The report said the average ticket size also witnessed a drop across all funding stages, with the late stage seeing the biggest fall of over 70 per cent, from $142 million in Q3 of 2021 to $42 million in Q3 of 2022. This is indicating that investors are not willing to make large investments until economic conditions stabilise.

“Our quarterly startup report confirms that India is currently experiencing a funding slowdown which is expected to continue for the next 12-18 months and the effects of the funding slowdown are expected to intensify going forward,” said Neha Singh, Co-Founder, Tracxn. “Executives across the world anticipate a recession in the near future and are making preparations to cut costs. To add to their woes, the recent energy crisis in the UK and Europe and also the sliding GBP and EUR have increased the likelihood of a global recession.”

The top three sectors that received the maximum funding in this quarter were Alternative Lending, Genomics and Payments. Genomics is an upcoming sector with great potential but remained untapped by investors till now. It saw maximum investor interest in Q3 2022, receiving over $231 million in funding, which is higher than the total funding received in the year 2021. 

The five companies that raised funding rounds of over $100 million in this quarter were 

EarlySalary, 5ire, InsuranceDekho, OneCard, and BookMyShow with the most active investors being Better Capital, Venture Catalysts and Surge. Of the 334 funding rounds closed in Q3, the top-3 funding rounds were completed by EarlySalary ($110 million, Series D), CleverTap ($105 million, Series D), and OneCard ($102 million, Series D). 

Some of the other key highlights of the report include these facts: 109 startups closed their first funding round, 3 startups turned unicorns, 39 startups got acquired, and 2 filed for their IPOs. Molbio Diagnostics, 5ire and OneCard turned unicorns and Zopper, LifeCell, Jar, DotPe, Vegrow

Bigspoon, InsuranceDekho, CUSMAT, Airtribe and Serentica Global joined the Soonicorn club.

India received $752 million in funding in the month of September down by 15 per cent as compared to August 2022 and down by 83 per cent as compared to the same period last year.

Bengaluru-based shared micro-mobility operator Yulu Bikes raised a large round of $83 million as a part of their Series B fundraise. Molbio Diagnostics, a PCR testing company raised $85 million in their Series C round and became a Unicorn.

“The Indian startup ecosystem is still experiencing the ongoing funding slowdown and the severe macroeconomic conditions gripping the West,” said Abhishek Goyal, Co-Founder, Tracxn. “We are seeing large PE and VC funds treading cautiously led by significant changes in the investment environment in recent quarters. We expect this to continue until we see signs of stabilisation globally.”

Tata acquired 1Mg, an online pharmacy that also entered the Unicorn club in September. There were 17 acquisitions that took place in September 2022 with Razorpay continuing its acquisition spree by acquiring PoshVine (a loyalty management platform), its 4th acquisition in 2022 and 7th till date. Another notable acquisition was Insight Cosmetics (Internet first cosmetic company) by Reliance Retail. Two companies, Kore Mobile and DreamFolks were the only 2 startups in the quarter that went public in September bringing the total to 10 tech IPOs this year, as opposed to 7 in the same period last year.

Bengaluru, Mumbai and Delhi-NCR were the top cities attracting maximum investments, as per the report. Blume Ventures topped the investment charts in seed-stage startups, Sequoia Capital ranked highest in the early-stage startup funding and GIC leading the late-stage funding.

•  Q3 2022 clocked $3 bn in funding, which is 57% lower than Q2 2022
•  The late-stage funding was impacted the most, with an 88% decline from Q3 2021 and a 64% drop from Q2 2022
•  Only 3 unicorns were added in Q3 2022, as opposed to 14 being added in the same period last year
•  EarlySalary, 5ire, InsuranceDekho, OneCard, and BookMyShow raised $100 mn+ rounds in this quarter
•  Bengaluru led the maximum total funding raised followed by Mumbai and Delhi NCR