Start-up funding in India saw its first uptick of the year in October after nine months of exhibiting a downward trend. Indian start-ups raised $1.08 billion in capital, up by 39 per cent as compared to September 2022, but down by 69 per cent year-on-year, according to Tracxn data.
The spike in October funding was driven by late-stage deals worth $846 million, a growth of 265 per cent over September. “This is mostly attributed to the two $100 million-plus rounds received by Udaan and Byju’s,” according to Tracxn.
Edtech decacorn Byju’s raised $250 million in a Series F round from existing investors as it continues to battle staggering losses and mass layoffs, while B2B e-commerce unicorn Udaan raised $120 million from existing shareholders, as it plans to go public in 12-18 months. This round came before Udaan laid off 350 employees in November.
Despite the increased momentum in late-stage deals, seed and early-stage funding continued to decline month-on-month by 17 per cent and 63 per cent, respectively. Retail, edtech and transportation & logistics emerged as the top three funded sectors in October, Tracxn shared.
Fintech funding winter
Interestingly, fintech, a traditionally hot sector among VCs, saw funding drop to its lowest this year to $109 million, down 48 per cent month-on-month and a whopping 93 per cent since October 2021.
“The payments segment (best performing sector in 2021) is one of the most impacted in 2022. The segment has seen a drop of 53 per cent in total funding in 2022 YTD as compared to the same period last year,” Tracxn revealed. “Another segment that has been majorly affected is cryptocurrencies. Till October 2022, it has seen a drop of 48 per cent in funding as compared to the same period last year,” it added.
Sharp decline in the value of crypto assets have led to a significant drop in transaction volumes for exchanges across the globe, including on Indian platforms like WazirX, CoinSwitch Kuber and CoinDCX. “Also, the regulatory uncertainty has affected the confidence of investors, because of which funding in the sector has seen a big drop,” Tracxn stated.
Overall, the fintech sector saw only one late-stage funding of $50 million in hybrid blockchain start-up XinFin (which is now a soonicorn). Alternative lending and investment tech, meanwhile, were the most funded fintech segments.
“Investment tech is the best performing market in the fintech sector, and has seen a 30 per cent increase in total funding till October 2022 as compared to the same period last year,” the report added.
Edtech has been under the scanner lately for being the worst hit sector in terms of start-up layoffs. Cumulatively, 11 edtech start-ups, including market leaders Byju’s, Unacademy and Vedantu, have laid off nearly 6,500 employees this year, as per Tracxn findings. The sector has also seen shifts in business models, rampant cost-cutting exercises, and total shutdowns.
Edtech funding has also declined in 2022 after the pandemic-led boom in online education in 2021. The sector has raised a total funding of $2.43 billion till October, down by 38 per cent from $3.98 billion last year.
Edtech added just two new unicorns this year – LEAD School and PhysicsWallah, both of which raised $100 million rounds each from GSV Ventures and WestBridge Capital.
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Also read: Winter over for tech start-ups? Fund raising hits $15.7 bn in ’22; deal volumes up 78% YoY