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 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.