Sequoia, Accel lead startup investors’ funding tally in H1 2020 even as investment declines 29%

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Published: July 8, 2020 6:16 PM

Funding in the first half of 2020 was led by $500 million raised by Byju’s from Tiger Global and General Atlantic (in two separate deals) and $300 million secured by FirstCry from SoftBank. Zomato, Swiggy, Unacademy and Bounce were other startups that raised over $100 million.

Investors had restricted investments in new companies during the period as most of them redirected to focus on their existing portfolio firms.

Covid-19 has dragged down startup funding during the first half (H1) of 2020 from a year-ago period. The equity funding has declined 28.81 per cent from $5.9 billion in nearly 750 rounds during H1 2019 to $4.2 billion in 461 rounds in the first six months of 2020, according to data shared by research firm Tracxn. The first half was led by $500 million raised by Byju’s from Tiger Global and General Atlantic and $300 million secured by FirstCry from SoftBank. Zomato, Swiggy, Unacademy and Bounce were other startups that raised over $100 million.

Sequoia Capital, which recently secured a commitment of $1.35 billion for two new funds focusing on startups in India and Southeast Asia, was the top VC investor during H1 2020 with around 23 investments followed around 15 deals made by Accel Partners. Inflection Point Ventures, Matrix Partners India, and Kalaari Capital were the other investors in the top five bracket. On the private equity side, Steadview Capital, FMO, General Atlantic, WestBridge and Faering Capital were the top PE funds. While Steadview made five investments during the said period, three investments were made by each of the other top four funds.

Investors had restricted investments in new companies during the period as most of them redirected to focus on their existing portfolio firms and helping them conserve cash during Covid. Lesser commitments were made by investors for new deals even as investments were also pulled back amid uncertainty in operations of existing portfolio companies as revenues were squeezed amid limited business activity.

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In terms of top startup hubs, Bengaluru had 61 per cent share in the total equity funding raised by startups followed 15 per cent share of Delhi NCR and 10 per cent share of Mumbai. Pune and Chennai had 9 per cent, 3 per cent shares respectively while Ahmedabad and Jaipur each had 1 per cent share in the funding during H1 2020.

Meanwhile, exits from businesses may also decline for the next six-12 months as investors are likely to stay invested in portfolio companies for longer than expected time to get desired returns. According to a Crisil survey having responses from 26 investors during May and June this year, 95 per cent investors claimed fall in exits with 67 per cent expected a drastic reduction ahead. Consequently, M&As as a strategic route to exit will increase in the short term according to 66 per cent investors.

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