Covid fails to dampen investors’ spirits as Q3 startup funding jumps 200% from year ago,193% from Q1

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October 1, 2020 2:17 PM

The biggest war chest was raised by Byju's during Q3 2020 while Zomato, Unacademy, Eruditus, Vedantu were other leading startups with maximum share in investor money. Sequoia, AngelList, Y Combinator, Matrix Partners, Inflection Point Ventures etc., were among top investors for the quarter ending September 30.

The startup intends to use the funds to continue to expand its operations and reachCrowdfunding was started as a social experiment several years ago.

Contrary to expectations, Indian private equity, venture capital, angel investors and others continue to bet on startups big time in the post-Covid world. After 338 per cent jump in startup funding in Q2 2020 from the year-ago period, Q3 witnessed 201 per cent increase in investments in comparison to Q3 2019, according to the data shared by startup research firm Tracxn with Financial Express Online. The July-September quarter this year saw startups raising $14.90 billion in 316 rounds up from $4.94 billion in relatively higher 447 rounds in the same quarter last year. In comparison, investors had poured $17.30 billion in 294 rounds in the June quarter vis-a-vis $3.95 billion in 492 rounds in Q2 2019. From $5.08 billion raised by startups across 401 deals in Q1 2020, the funding has been up 193 per cent for the quarter ending September 30.

The jump in investments has come despite Covid-related challenges for startups and investors to meet physically over deal tables even as virtual discussions became the new normal to overcome the lockdown barriers. Amid the pandemic, investors such as Sequoia have even introduced a programme to support startups. The venture fund had last month introduced The Guild initiative for its portfolio startups to share and learn from experiences of other successful entrepreneurs. Another fund Chiratae Ventures launched the new edition of their Innovator’s Program to support early-stage startups while IvyCap Ventures had also launched the third edition of Futurance programme through its startup platform IvyCamp along with HDFC Life for startups in the insurance sector.

In fact, Covid enabled platforms in B2C segments such as edtech, grocery, and healthcare to multiply their reach amid safety concerns for consumers to undertake activities in the physical world. The biggest war chest was raised by the second most valued unicorn in India Byju’s. The edtech company had secured $622 million from Silver Lake, Tiger Global, General Atlantic and Owl Ventures valuing the company at a whopping $11.1 billion. Zomato’s $190 million funding, Unacademy’s over $153 million investment, $113 million funding in Eruditus, $100 million in Vedantu, $90 million in MPL and LivSpace each, $62.8 million in Flipkart, and Acko’s $60 million funding were other majority investments in Q3. Moreover, the majority amount was put into late-stage deals with 61 rounds involving $14.10 billion while $605 million were invested across 75 early-stage deals and $126 million in 180 seed rounds.

Also read: CBDT: Payment gateways won’t have to pay tax on e-commerce transactions under this scenario

Among top investors striking maximum deals were Sequoia with 19 deals followed by 12 deals by investment platform AngelList, 11 by startup accelerator Y Combinator, nine by Matrix Partners, seven by Inflection Point Ventures, and Lightspeed Venture Partners each, six by Blume and Nexus Venture Partners and five by Accel, Beenext and WaterBridge Ventures.

Indian startups have seen significant growth not just in the past decade or so but also in the past few years. Between 2016 and the first half of 2020, startups raised $63 billion to become the third-largest startup ecosystem globally and churned out nearly 35 unicorns, according to a report by IVCA and Praxis Global Alliance. “E-commerce and tech startups have shown resilience during Covid fundamentally altering their unit economics to become more sustainable…Covid-19 has reaffirmed the focus on cost efficiency to boost bottom lines and capital efficiency to boost investor return. We anticipate a continued increase in the number of unicorns coming out of India,” said Madhur Singhal, MD, Praxis Global Alliance.

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