As India faces funding winter, August sees 20% decline in startup fund sizes: Report

The month of August for startups in India was a tough one as funding rounds declined 20 percent when compared with July 2022, according to a data complied by Tracxn. Amid a crucial slowdown, often referred to as "funding winter", startups witnessed $885 million in funding, 102 funding rounds and 9 acquisitions, which were down by 20 percent, 8 percent, and 18 percent, respectively compared on a month-on-month basis, Tracxn stated in its August 2022 report on the Indian Tech Startup Space.

To be sure, the funding winter has hit startups across stages in India, whether it is growth-stage companies unable to raise new funding, or early-stage startups that have to settle for lower-than-expected valuations and fund sizes. Tracxn mentions that this phenomenon --arising due to Indian firms receiving a massive influx of VC fundings earlier, leading them to focus more on rapid growth than profitability -- is expected to continue for the next 12-18 months. The quarterly funding peaked in third quarter of 2021 at $14.8 billion and is on a steady decline since then, it added.

However, all is not lost for startups in India, which has added 19 unicorns so far this year, taking the total number of unicorn startups in the country to over 100. Despite the funding squeeze, edtech unicorn UpGrad was able to raise another big round of $ 210 million funding last month after raising $225 million funding in June this year and also aims to achieve $500 million in gross revenue in FY23.

Moreover, the company also plans to hire 2,800 full time and part-time faculty in the next 3 months at a time when several other edtech startups such as Unacademy, Byju's, Vedantu laid off over 2,500 employees this year in an attempt to aggressively cut costs with demand for edtech services after witnessing hypergrowth.