Startup funding deals decline by 50% in January, 2017

Priyanka Sahay

Moneycontrol

The year 2017 has started with a cautious mood amongst investors in the Indian startup ecoystem. Last month, barely USD 173 million worth of investments took place in Indian startups compared to over twice that number in the same period, a year ago.

According to the data, shared by research firm Tracxn, the sector witnessed USD 173.89 million worth of venture capital funding across 108 deals in January this year. In comparison, the number stood at USD 453.19 million across a similar number of deals during the year ago period.

The decline can be attributed to a wait and watch approach adopted by VCs and Private Equity funds as consumer internet startups have suffered a decline in demand post demonetisation.

Investors seem to be shying away from the heavily funded ecommerce and hyperlocal sectors. In January 2017, the top funded sector was health-tech against consumer tech in 2016.

Startups that aim to solve health problems through technology raised USD 56.39 million in January. Bangalore-based Practo alone raised USD 55 million funding from new and existing investors such as China’s Tencent Holdings, Sequoia Capital and Matrix Partners, among others.

Overall, besides a couple of big ticket investments, most of the deals were scattered across smaller deal sizes in angel and Series A rounds.

As compared to December 2016, January saw more number of deals but the total amount funded remained lower. In December 2016, the internet and startup sector raised USD 220.62 million funding across 83 deals.

This again is a significant decline against USD 307.53 million that the startups raised across 99 deals in December of 2015. The declining interest and risk appetite of investors shows a slowing down of the hype saw amongst VC funds to invest early on in 2014 and 2015.

The year 2016 was a period of correction.

The total funding received by India’s startup sector in 2016 stood at USD 3.9 billion almost half against USD 7.5 billion received in 2015.

After a slow year, 2017 is expected to see some big ticket announcements in the latter half even as struggling startups are doomed to die or merge with bigger ones. For now the market is witnessing some much required consolidation, especially in the e-commerce segment.

priyanka.sahay@nw18.com