The new year failed to cheer up the Indian startup ecosystem as venture investments in the country hit a four-month low at $1.15 billion in January amid deepening funding woes and massive tech layoffs. The funding was raised across 100 private equity and venture capital transactions, according to proprietary data compiled by DealStreetAsia.
Fundraising fell about 8% compared with December when startups had collectively garnered $1.25 billion across 102 transactions.
Fundraising has been on a decline for the past few months as investors are doing more thorough checks and scrutinising the unit economics of businesses, particularly those making steep losses.
On a year-on-year basis, the deal value dropped more than a third from the high of $4.43 billion in January 2022, while the volume almost halved.
With the funding winter showing no signs of thawing, a lot of companies are resorting to mass layoffs to cut costs and stay afloat. Startups that were recently in the news for slashing jobs include social media company ShareChat, healthtech unicorn Innovaccer, taxi aggregator Ola, food delivery platform Swiggy, digital healthcare platform MediBuddy, and edtech unicorns BYJU’S and Unacademy.
In terms of mega deals, only two transactions worth $100 million and above were sealed during the month. These include PhonePe’s $350-million round led by private equity major General Atlantic and KreditBee’s $100 million led by Advent International.
Other bigger deals closed during the month include Enzene Bioscience ($50 million), Wakefit ($40 million), InsuranceDekho ($36.5 million), SarvaGram ($35 million), and Mad Street Den ($30 million).
For the fourth consecutive month, no startup made it to the unicorn club in January.
Top 10 deals in January 2023
Financial services grabs lion’s share
Financial services emerged as the most funded industry with total investments worth $515 million across 11 transactions, compared with just $288 million across 19 transactions in December.
Within financial services, Walmart-owned digital payments app PhonePe raised the largest round of $350 million at a $12-billion valuation. The fundraise follows PhonePe’s recently announced change of domicile to India and full separation from Flipkart. Other prominent deals include KreditBee ($100 million), SarvaGram ($35 million), Neogrowth ($10 million), and Varthana ($7 million).
Software startups followed with a total of $161.8 million in funding across 17 deals. Enterprise AI company Mad Street Den (MSD) secured the highest financing of $30 million in its Series C funding round led by Avatar Growth Capital. Existing investors Sequoia Capital and Alpha Wave Global also participated in the round.
Other software startups that raised funding during the month include SironLabs ($25 million), Beaconstac ($25 million), Park+ ($17 million), Cropin ($13.7 million), and Rigi ($12.25 million), among others.
The retail industry occupied the third spot with a total of $82 million in funding across 11 transactions. Together, the top three industries — financial services, software, and retail — raised a total of $759 million, accounting for about 66% of the total deal value in January.
Among verticals, fintech startups scored the highest funding worth $370 million, followed by e-commerce ($155 million) and fintech lending ($145 million).
Growth-stage VC investment lags
The share of growth-stage deals — Series B or post-Series B rounds — in the total funding tally dropped significantly in January to $327 million across 12 transactions as investors continued to shy away from making big bets. In comparison, December saw 22 growth deals worth $853 million.
Startups that raised growth rounds in January include credit-based fintech startup KreditBee, direct-to-consumer brand Wakefit, fintech startup SarvaGram, agritech platform Cropin, car owners-focused app Park+, enterprise AI company Mad Street Den, bike rental and EV startup Bounce Infinity, and electric vehicle-focused advanced battery platform Log9 Materials.
Fundraising by startups at the pre-seed and seed stages recovered marginally to touch $48 million in January across 33 transactions from $40 million in December. The value of pre-Series A and Series A deals was up 34% at $183 million in January, while deal volume rose 81% to 29.
While the volume of debt deals dropped to six in January, the value rose about 60% to $64 million. Meanwhile, two private equity deals worth $ 360 million were closed in the month, including PhonePe and Mumbai Oncocare Centre.
Most active investors
Sequoia Capital India regained the number one spot with a total of at least eight investments in startups, including Park+, Toddle, Bounce Infinity, ApnaKlub, Wakefit, Mad Street Den, Locad, and Rigi. Last year, Sequoia Capital raised $2.85 billion to invest in startups in India and Southeast Asia. Of this, the venture capital firm will deploy about $2 billion in Indian startups alone.
Better Capital, Blume Ventures, and Venture Catalysts, along with its accelerator fund 9Unicorns, occupied the second spot with four investments each. Better Capital backed startups, including Toddle, STAGE, Gullak, and Turns, while Blume Ventures invested in Virohan, ElectricPe, STAGE, and ApnaKlub.
Other prominent investors in the month include Accel, Antler India, Inflection Point Ventures, Elevation Capital, Y Combinator, LetsVenture, Anicut Capital, and Titan Capital, among others.