Venture funding to Asia-based startups will fall 31 percent sequentially in the April-June quarter of 2022, a report by business analytics company CB Insights projected.
The report titled ‘State of Venture’ also showed that venture funding to Asian startups fell 36 percent in the first quarter of calendar year 2022 on a quarter-on-quarter (QoQ) basis. Further, the report suggested that mega-rounds to Asia-based companies will fall 25 percent sequentially in associated funding.
Globally, the report projected that venture funding will see a 19 percent drop in April-June period sequentially, after it fell almost 20 percent in January-March quarter on a QoQ basis. Global funding raised from larger than $100 million deals will drop 18 percent QoQ in the second quarter of 2022, according to the report.
The State of Venture report also showed that global funding is on pace to continue to decline in April-June for the fintech, retail tech, and digital health spaces. Fintech sector will see a 28 percent drop in funding in April-June on quarter, while retail tech will see a 50 percent drop and digital health will see a 25% fall, the report showed.
The data attains significance as it comes at a time when fintech companies like Cred and Slice, and retail tech companies like Meesho have found it harder to raise funds at aggressive valuations, according to sources in the know. The three companies have been backed by aggressive tech investors like Tiger Global and SoftBank, which have gone slow on funding in 2022.
The CB Insights report also showed that the quarterly count for new unicorns is expected to fall below 100 for the first time since 2020 in Apr-Jun as there will be only 62 unicorns getting minted in the quarter, which is a 46 percent drop sequentially. Minting of new unicorns in the US and Asia is likely to be hit hardest, report showed. The projected drop in new unicorns in the US and Asia is 43 percent and 67 percent respectively on quarter.
In India, so far in the Apr-Jun quarter, investors have minted only one unicorn–neo banking platform Open, against 10 in the same period last year. In Jan-Mar this year, India got 14 new unicorns, according to data compiled by Moneycontrol.
Owing to public market volatility, many startups have put a pause on their exit plans, with total IPOs (initial public offering) projected to fall to 92 in Apr-Jun, marking a 9-month low and a 34 percent drop, the report showed. The data comes at a time when Indian companies like Pharmeasy, Oyo, Snapdeal, Byju’s, and Ola among others have put their listing plans on hold. The number of new SPACs (special purpose acquisition vehicles) getting listed is also projected to fall to 12 in Apr-Jun from 19 in Jan-Mar, according to the report.
The report also showed that merger and acquisition (M&A) activity slowed down in Apr-Jun and is projected to fall 22 percent sequentially to 2,322 deals.