Startups in India received funding of $24 billion in calendar year 2022, a drop of 33% in comparison to CY21 but was still more than twice the funds raised in CY20 and CY19 each, found a PwC India report titled, Startup Deals Tracker – CY22.
Early-stage funding grew by 12% compared to CY21, showing that despite the global slowdown, investors were still optimistic about the Indian start-up ecosystem, the report revealed. Also, the software-as-a-service (SaaS) segment witnessed an increase of 20% in funding values during CY22 compared to CY21 and accounted for nearly 25% of all funding activities last year, it reported.
Amit Nawka, Partner – Deals & India Startups Leader, PwC India, said, “Despite the funding slowdown, some areas like SaaS and early-stage funding have remained upbeat. With significant dry powder waiting to be invested, it seems likely that the funding scenario will begin to normalise after 2-3 quarters. Until then however, many start-ups are using this time to tighten operating models and optimise their cash runway by deferring discretionary spends and investments.”
At least 21 startups entered the unicorn club in 2022. As of 31 December 2022, SaaS continues to lead with the most number of unicorns at 20, followed by fintech at 16. Precisely, SaaS and fintech are top two sectors representing nearly 33% and 17% of all funded startups in India, the report added.
The top five sectors that attracted funding were SaaS, fintech, logitech and autotech, edtech and direct to consumer (D2C), contributing approximately 71% of the total funding in CY22 in value terms, the report stated.
Apart from SaaS, the media and entertainment sector also showed growth in funding activity during CY22. The steepest decline in funding during CY22 was witnessed in e- commerce business to consumer (B2C) at 71% and edtech at 54%
246 M&A deals involving startups were executed in CY22. Of these, nearly 200 were domestic transactions and the rest were cross-border transactions. SaaS, e-commerce and D2C attracted the highest number of M&A transactions during CY22.
Bengaluru, NCR and Mumbai accounted for nearly 82% of total Indian startups as of December 2022. 28% of the startups in the top three cities have raised in excess of $20 million.
According to the report, as of December 2022, there were more than 1,800 funded startups in India – a base that has consistently grown during CY22. With continuing tech-led innovations, supported by the improving technological infrastructure in India, rising incomes and aspirations of Indian people, and significant venture capital dry powder waiting to be invested, CY23 has started off with renewed optimism for start-ups and investors, the report added.
