India startup sector sees 80% drop in Q3 funding, slowdown to continue

The funding in Indian startups nosedived a massive 80 per cent (year-on-year) in the third quarter (July-September period) this year, with the late stage funding seeing the biggest fall, a report showed on Tuesday.

Indian startups raised $3 billion in Q3, which was also 57 per cent lower as compared to the previous quarter (Q2) this year.

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 2021 to $42 million in Q3 2022.

This indicated that investors are not willing to make large investments until economic conditions stabilise, reports market intelligence platform Tracxn.

"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," Singh added.

Genomics sector in India saw maximum investor interest in Q3, 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 more than $100 million in the quarter were EarlySalary, 5ire, InsuranceDekho, OneCard, and BookMyShow, with the most active investors being Better Capital, Venture Catalysts and Surge.

Some of the other key highlights were 109 startups closing their first funding round, three startups turning unicorns, 39 startups getting acquired, and two filing 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 and down by 83 per cent as compared to the same period last year.

"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,a said Abhishek Goyal, Co-Founder, Tracxn.