August’22 sets new lows for Startup Funding in 2022; Worst of 18 Months at only $1.1 Bn fundraise

Funding Report

August witnessed the same inflow of capital as July. In August 2022, the startup ecosystem raised $1.1 billion in funding, which is the same figure as last month.

July 2022 was reported as the worst month in 17 months with the lowest funding on record at 127 deals. The number of deals fell further to 101 in August, indicating a 20.4% drop over the past month.

After a continuous decline in startup financing since February this year, there was an increase in the volume of funds raised in June. The ecosystem has seen several fledgling startups such as CRED, Physicswallah, ShareChat, upGrad, Stashfin and LeadSquared raise deals above $100 million.

However, the number of mega deals was reduced to just three in August, with upGrad raising another $210 million round, EarlySalary raising $110 million, and CleverTap raising $105 million.

The data further indicates an 84% year-over-year (YoY) decline in late-stage funding volume and a 52% year-over-year decline in late-stage deals.

The amount of initial financing and the number of deals suffered a significant decrease in all other phases even in August 2022. At the year-on-year level, a sharp decrease in both the amount of initial financing and the number of deals is also observed.

Funding amount and number of deals decreased by 73% and 32% in August 2022 compared to the previous year. Interestingly, in August, we also found Mumbai usurping Bengaluru in terms of total venture capital flow, with startups raising USD 585 Mn. Though Bengaluru continued to lead the number of deals with 35 transactions.

As for the sector, fintech was also the apple of the investor’s eye in August 2022. Of the total $1.1 billion raised in August 2022, fintech startups received the maximum of 24.7%, followed by enterprise tech and edtech. Fintech ranks first in the number of stores, followed by enterprise tech and e-commerce.

There is no doubt about the continued slowdown in funding in the Indian startup ecosystem. Unfavourable geopolitical and macroeconomic conditions coupled with high valuations of Indian startups have led to a slowdown currently, but these factors will impact funding in the next few quarters.

According to “The State of Indian Startup Ecosystem Report, 2022”, Indian startups are expected to see reduced funding in 2022 and 2023 compared to 2021. While last year was indeed a watershed year for startup funding in the country, there are massive corrections underway in markets around the world. Indian startup valuations and funding are also undergoing a correction, for better or for worse.

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