The funds coming into Indian startups through the private equity (PE) and venture capital (VC) route slowed a little over 32 percent by value in 2022, as the ecosystem witnessed a prolonged effect of the funding winter.
PE/VC funds made 1,130 bets on startups worth $23.95 billion in 2022, while last year, thanks to funds pouring into the ecosystem during 2021’s funding frenzy, private market investors had made 1,215 bets worth $35.46 billion, the data showed.
After the initial few months of 2022, with the pandemic receding and inflation rising, central banks had been rolling back excess liquidity from the banking system and raising rates to tame inflation, resulting in money becoming expensive. Investors (both private and public market) have thus cut back on their investments this year.
According to the data shared by Venture Intelligence, December recorded the lowest funding to startups in the last two years. Indian startups raised $799 million in 54 deals this month, a drop of over 30 percent month on month from $1,149 million in 69 deals recorded last month.
Deal sizes
Moneycontrol had reported earlier how the funding winter has also led to investors making smaller-sized bets, especially at late-stage deals.
According to updated data by Venture Intelligence, the average deal size of late-stage transactions (investment into companies that are over 10 years old, or Series G or later rounds of institutional investments) fell 39 percent to $90 million in 2022 from $148 million last year.
Total investments in late-stage deals also almost halved to $6,584 million in 2022 from $12,297 million last year.
However, early-and-growth-stage deal sizes have gone up in 2022 versus 2021. The average cheque sizes of growth stage deals (Series C and Series D) have gone up to $7.9 million this year from $6.9 million last year. Early-stage deal sizes, meanwhile, have gone up to $4 million on average in 2022 from $3.4 million in 2021.
Top deals in 2022
Among startups in 2022, VerSe Innovation which runs the news aggregator platform DailyHunt, raised $805 million from Luxor Capital, Ontario Teachers Pension Plan, Sofina, Baillie Gifford, CPPIB (Canada Pension Plan Investment Board). Following it, the next big deal was worth $700 million, when Baron Capital and Prosus Ventures led a round in Swiggy.
In 2021, Flipkart had raised $3.6 billion from a clutch of investors including Antara Capital, Tencent, Qatar Investment Authority, CPPIB, SoftBank Corp, Franklin Templeton PE, Tiger Global, and GIC among others, in what was 2021’s largest PE/VC deal.
Most active VC investors
Sequoia Capital has retained its position as the most-active investor by the number of deals in 2022. However, this year, Sequoia Capital has made 73 deals versus 110 in 2021, a fall of about 34 percent year-on-year.
Interestingly, Better Capital boosted deals this year making 57 investments compared to a low three last year. Other than Sequoia and Better, Accel India, Tiger Global, Blume Ventures, and Info Edge, among others were the most aggressive VC firms in India.
Also Read: Tiger Global Series A participation up 80% on year as startups face funding winter
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