the same period in the previous year, Tracxn Geo Annual Report: India Tech 2022, a report released by global market intelligence platform, Tracxn, said. The significant drop in funding is attributed to a decline in late-stage investments, which fell by 45% from $29.3 billion between Jan-Nov 2021 to $16.1 billion for the same period in 2022, the report claimed.
Rising interest rates and fears of global recession have led to investors becoming more risk-averse, continually slowing down the funding momentum in the Indian startup ecosystem, Neha Singh, co-founder, Tracxn, stated. “The funding winter, which began in Q4 of 2021, will persist in 2023 as well. In order to survive the drought, startups are taking unit economics more seriously, which has been illustrated through the series of mass layoffs that have occurred this year,” she added.
Compared to 2021, seed stage rounds are currently experiencing a contraction and have dropped by 38%, the report observed. Moreover, it found that The number of big-ticket funding rounds has also dropped by 35% to 55 in 2022 as compared to 85 in 2021. According to the report, fintech and retail emerged as the top-performing sectors in terms of funding, although they have seen a drop in funding of 57% and 41% respectively compared to the same period last year. BYJU’s has raised $1.2 billion in two $100 million rounds, followed by VerSe and Swiggy which raised $805 million and $700 million respectively in 2022.
As per the report, the RBI policy which prohibits non-bank financial institutions (NBFIs) from loading their prepaid instruments using credit lines is the reason for the disrupting fintech sector. Furthermore, with crypto experiencing major volatility in asset prices this year, crypto exchanges across the globe as well as in India are facing operational difficulties, it observed.
The other key sector, ed-tech, has seen a significant drop in 2022 with its funding falling by 39% compared to the same period last year. The sector attributed this decline in demand to schools and colleges reopening after the pandemic, which forced many players to lay off their workforces to reduce operational costs. Although the sector is undergoing a slowdown, 70% of ed-tech funding in 2022 is made up of five over $100 million rounds raised by BYJU’s, Upgrad, LEAD School and PhysicsWallah, it highlighted.
In addition, the report observed that 22 startups entering were deemed as unicorns, which means they had a valuation of over $1 billion, as compared to 46 in the previous year, with 11 exits occurring through IPOs. The most active investors of the year were LetsVenture, AngelList and Y Combinator, it added further.