During a month that was plagued with layoffs and a lack of significant funding rounds, Indian startups failed to surpass the $1 billion funding mark. Plus, more than half of the funding came from investments in a few late-stage companies.
75 businesses raised roughly $990 million in April, according to Fintrackr data. From $1.3 billion the month prior, this represents a dramatic decrease of over 24%. While early stage startups took home $211 million across 61 deals, growth and late stage startups managed to scoop up $778 million across 14 deals. Eleven startups opted not to disclose the financial details of their transactions.
101 transactions totaling $1.1 billion were completed in January; this number dropped to $859 million in February; and then increased to $1.3 billion in March to round out the first quarter. Even last year, $4 billion in March and $2.65 billion in April represented a 33.75% fall in funding for Indian businesses. Additionally, over the past three years, funding has decreased steadily in April. DMI Finance (NBFC) and PhonePe each received $400 million and $100 million from the top 10 development stage agreements, respectively. Other than these two, no startup received more than $100 million in capital in the previous month.
The following companies received capital totaling $50 million, $41.3 million, and $36.5 million: the cyber risk quantification business Safe Security, the financial company U Gro, and the cloud kitchen brand Curefoods. A secondary transaction raised $40 million for the third-party, end-to-end logistics service XpressBees. Since the beginning of the year, no startup has surpassed the unicorn valuation ($1 billion) barrier.
Molbio Diagnostics became India’s last unicorn in September 2022, with a $85 million financing funded by Temasek.
JSW One Platforms, a B2B e-commerce startup, topped the early stage transactions with a $25 million Series A round. Magenta Mobility, a provider of electric mobility solutions, and Mayhem Studios, a mobile game production studio, are the other two early stage firms to have raised more than $20 million in the last month.
Other significant deals on the list were B2B cold chain marketplace Celcius, SaaS buying and management platform Spendflo, consumer loan platform Niro, and D2C eco-friendly products producer EcoSoul Home.
Deals by segment and city
In terms of the number of deals in April, e-commerce leads the pack. These companies raised over $68 million in 14 transactions. However, when it came to the amount raised, fintech remained on top. Last month, nine fintech firms raised $615 million in total, accounting for more than 60% of total funding. Following that were SaaS, foodtech, EV, and AI. Edtech and agritech were ranked tenth and eleventh, respectively.
Bengaluru held its top spot with 35 transactions (more than 40% of total funding), followed by Delhi NCR with 14 deals. Mumbai came in third place for the most deals, but when it comes to deal value, it much outpaced Delhi NCR. Pune and Ahmedabad succeeded in making the top 5 cities ranking.
Deals made in stages
Twenty seed ventures were funded in April, compared to seven pre-seed deals. Following that, 13 and 11 startups received funding through the Series A and pre-Series A rounds, respectively. Series B, Series C, and Series D witnessed 5, 1, and 3 deals in growth and late stage deals, respectively. It’s important to note that five firms were recently funded using revenue-based funding.
Acquisitions and Mergers
In April, there were 15 merger and acquisition agreements. Although the majority of the acquisitions’ deal sizes are still unknown, there have been a few noteworthy transactions in the past month. The acquisitions of TROOPERS by Betterplace, Metamorphosis Edu by BrightCHAMPS, and Verak by InsuranceDekho received attention.
According to statistics provided by Fintrackr based on many media stories, 12 startups reduced the size of some of their workforces in April. The change affected more than 1700 workers. In the first three months of 2023 (January to March), more than 6,000 workers were let off. The most layoffs occurred at Byju’s, Unacademy, upGrad Campus, ShareChat, GoMechanic, and Swiggy in Q1. At this rate, the number of layoffs may reach or approach the record set the previous year.
For perspective, in 2022 there were almost 20,000 layoffs.
Even as the funding slowdown for startups continues, it is obvious that industries like e-commerce, SaaS, and IT are low on investors’ priority lists. As reality sets in, hardly credible investments in quick commerce, Kirana tech, and similar schemes that have damaged investor confidence and wallets should also be history.
While the opportunities in fintech are still present and will continue to draw new startups and investors, what is long overdue is the start of stronger investor interest in sectors like climate tech and renewables, where regulatory changes are opening up space for new startups to enter. Long-term finance would be welcomed for these prospects, whether they involve carbon markets or renewable energy.
Even while some of the biggest fund-backed businesses in edtech or fintech appear to be having trouble, don’t rule out a major recovery in these industries at some point, as increasing consolidation removes inefficiencies. These are nevertheless sizable industries that will unavoidably draw investment, as we have seen with even agritech, where money has managed to incubate ever-larger companies despite several obstacles.