Indian startups continue to see a decline in funding for the third straight quarter in July-September, making it the least funded quarter in the last five years, according to a report by research platform Tracxn. Startups raised $1.5 billion in this quarter, which is 29% lower than the April-June quarter and 54% when compared year-on year.
Indian startup sector has been witnessing a funding winter, which was preceded by an exceptional year of investment in 2021.
During the July-September quarter, only two companies — quick commerce startup Zepto and cybersecurity firm Zyber 365 — took their valuation beyond a $1 billion to turn unicorn. For comparison, in the corresponding quarter last year, four unicorns had emerged in the startup space.
“Despite facing the challenges of a funding winter, India ranks as the fifth highest-funded country in Q3 and maintains its fourth position in terms of total funding for the year to date period,” said Neha Singh, co-founder, Tracxn.
Besides Zepto and Zyber 365, three other startups — fintech firm Perfios and EV startups Ola Electric, and Ather Energy — managed to raise over $100 million in funding.
Perfios topped the list with a Series D round of $229 million, led by private equity firm Kedaara Capital. As per the report, the top investors in Q3 were venture capital firms Accel, Blume, and Peak XV Partners (formerly Sequoia Capital India).
While the startups which raised funds in early and seed stages were the worst hit, with a decline of about 75% when compared to the corresponding quarter last year, late-stage funding saw a drop of 33%, the report said.
However, when seen on a month-on-month basis, startup funding jumped 91% to $720 million in September from $376 million in August, noted Tracxn co-founder Abhishek Goyal.
Among the top-performing sectors in this quarter were enterprise applications, fintech, and transportation and logistics tech, with the growth in the fintech sector being the highest at 68% year-on-year at $436 million.
“The investment growth in the fintech sector is propelled due to the rapid growth seen in the adoption of UPI both in the domestic market and international markets like Bhutan, France, the UAE, Saudi Arabia, Bahrain and Singapore,” the report said.
Among the Indian cities, Bengaluru saw the highest funding, followed by Mumbai and Noida.