Funding activity and deal volume for Indian startups plummeted to a nine-year low in April, indicating a prolonged tough economic environment for these companies.
In April, 58 agreements totaling $381 million in angel and venture capital funding were made for Indian firms. Data compiled by VCCedge, a research platform of VCCircle, showed that this was the lowest number of deals announced since April 2014, when 50 deals totaling $108 million were announced.
The global economic downturn, rising interest rates, stock market volatility, and re-ratings of technology stocks have all contributed to a protracted funding winter for the startup ecosystem. Due to the increased caution among investors, the quantity of money accessible to entrepreneurs has dramatically decreased.
A re-evaluation of investments has also resulted from worries about startup valuations that are absurdly high, with many investors becoming more picky about where they invest their money. In the Indian startup ecosystem, this has also contributed to a decline in deal-making and funding activity. In April of this year, 1.9 deals were completed each day on average. Deal-making this year was at its lowest point since 2015 in terms of month-to-month numbers. Even on a month-on-month basis, deal-making in April was the lowest it has been in 2023.
In April 2022, Indian startups recorded 146 deals worth a total of $3.3 billion. In comparison, the total amount raised so far in 2023 has yet to surpass the value recorded in April 2022 alone.
Compared to February’s revised total of $482 million, startup funding transactions in March of this year totaled $1.1 billion, which is less than half the value of all deals signed in March of the following year.
India experienced a surge in startup funding in 2021 as private equity and venture capital investors invested billions of dollars in regional businesses. In 2021, India will have 100 unicorns, or startups with a $1 billion or above valuation. However, as stock markets recovered and central banks began to tighten interest rates, concerns arose about extremely high valuations affecting startup funding activity.
Mohammad Faraz, co-founder and partner at micro-venture capital firm Upsparks Capital, stated in an interview that “the bear market is expected to persist until there is substantial improvement in global macroeconomic conditions.”
There are currently not many. Deal-making has slowed down in India at all levels due to the abundance of deals that are being completed there and the cautious attitude of investors. Indian startups are adopting a default survival mentality till things change.
Many firms have been compelled to use harsh cost-cutting measures, such as layoffs, due to a lack of funding. Meesho, an e-commerce platform funded by SoftBank, let go of roughly 251 employees last week, or 15% of its whole workforce. At Meesho, there have been three rounds of layoffs in the past year or so. In August 2022, the business fired over 300 workers from its grocery-focused Superstore, which was operating in six states at the time. In April of last year, it had also sent pink slips to about 150 workers.
Meanwhile, online math tutoring platform Cuemath on Monday announced layoffs of 100 employees or about 12.5% of its 800-strong workforce. Manan Khurma, the founder of the Bengaluru-based edtech startup, also returned as its chief executive officer.