Start-up funding likely to dry up by11-36% in 2020 – report

By: |
September 8, 2020 8:59 AM

The drop can be cushioned, to some extent, if growth- and late-stage start-ups are able to attract high-ticket investments and investor interest remains intact in sectors like edtech, fintech, online gaming, e-commerce, enterprise tech, the report revealed.

Start up funding, Start up funding in india, edtech, fintech, Unacademy, soft bank, Byju, Chinese apps,  DST GlobalNearly 16 of 44 edtech funding deals were bagged by online test preparation start-ups, noted analysts in the report.

Start-up funding in India is estimated to see a year-on-year (y-o-y) decline of 11-36% in 2020, according to a report by media platform Inc42. The drop can be cushioned, to some extent, if growth- and late-stage start-ups are able to attract high-ticket investments and investor interest remains intact in sectors like edtech, fintech, online gaming, e-commerce, enterprise tech, the report revealed.

In that case, start-ups may end up raising $11.3 billion, recording a moderate 11% decline compared to 2019. However, if big-ticket funding takes a hit and competent sectors like edtech fail to generate sizeable financing from investors, the decrease in funding may be as much as 36.2% to $8.1 billion, analysts at the firm said.

Total funding in H12020 (excluding deals valued at $200 million and above) stood at about $3.2 billion. Fintech and edtech segments led the highest number of deals during the period, the report showed.

Last week, edtech firm Unacademy entered the unicorn club after SoftBank led a $150-million funding round in the company. Unacademy’s valuation touched $1.45 billion following the investment. The Bengaluru-based company joined a handful of other start-ups in the edtech space that has been generating considerable investor interest, of late. In August, billionaire Yuri Milner-led DST Global infused a fresh $122 million in rival Byju’s, which is expected to invest more capital in the firm.

The valuation of Byju’s hit $10.5 billion in late June after it secured the backing of US-based Bond. Recently, Eruditus raised $113 million from investors, including Chang Zuckerberg Initiative, giving it a post-money valuation of $800 million. In July, US-based Coatue led a $100 million funding round in Vedantu.

Nearly 16 of 44 edtech funding deals were bagged by online test preparation start-ups, noted analysts in the report.
In the fintech sector, firms operating in the lending space recorded the highest number of deals. Seed-stage funding, however, dipped to $140 million in HI2020 after touching a peak of $450 million in 2018, on the back of policy hurdles such as angle tax and decrease in the number of new start-up launches. The only outlier is the media and entertainment space that registered growing investor interest in seed-stage companies primarily due to the ban on Chinese apps. Investment in late-stage firms remained largely stagnant although the number of deals went up.

In the period of 2014-HI2020, the e-commerce space led the total start-up funding, garnering a little over $16 billion across 732 deals. Along with fintech and consumer services, the three sectors collectively accounted for 51% of the overall capital raised by start-ups during the period. Sequoia Capital emerged as the top investor in HI2020, stated the report.

Analysts estimated that over 50 companies had the potential to achieve a valuation of over $1billion by 2022. The years 2018 and 2019 saw the highest number of start-ups entering the unicorn club, at 10 and seven, respectively.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1CLCSS: Small businesses supported in FY21 under technology upgradation scheme highest in five years
2Over 82% small businesses had negative Covid impact; lack of market access top challenge: Survey
3RBI loan moratorium of little help for MSMEs as business recovery to repay remained low, say experts