Early stage deals contributed around 21% of the total funding by value in Q3 CY22 compared to 12% in Q2 CY22, showing that there is significant dry powder in the Indian start-up ecosystem.
According to the PwC India study “Startup Agreements Tracker – Q3 CY22,” the global downturn in fundraising continues, with start-up funding in India in Q3 CY22 reaching a two-year low of USD 2.7 billion across 205 deals.
While funding has decreased across all stages of investment – early, growth, and late – the decline has been greatest in early-stage deals, which contributed approximately 21% of total funding by value in Q3 CY22 compared to approximately 12% in Q2 CY22, demonstrating that venture capital (VC) firms continue to support the Indian start-up ecosystem.
“It is difficult to forecast how long the fundraising slowdown will endure, but certainly, both founders and investors are being more careful and cautious in deal-making, Early-stage start-ups will be able to raise cash more easily than late-stage agreements since they are often more protected from swings in the public markets. However, investors have already accumulated a significant amount of capital that must be deployed, and this will eventually find its way to the Indian start-up ecosystem.”said Amit Nawka, Partner – Deals & India Startups Leader, PwC India.
Startup Perspectives for Q3 of CY22 – A snapshot
Stages of funding: In Q3 CY22, growth and late-stage capital deals accounted for 79% of funding activity (value terms).
This accounted for 30% of total deal activity (count terms). The average ticket size in growth-stage deals continued to fall, reaching USD 32 million in Q3 CY22. Early-stage agreements accounted for 70% of overall capital in Q3 CY22, up from 60% in Q2 CY22 (in volume terms).
The average ticket amount per deal varied between USD 4-5 million. Early-stage agreements provided around 21% of overall capital in Q3 CY22, compared to approximately 12% in Q2 CY22.
M&A transactions:In Q3 CY22, 38 M&A transactions involving start-ups were completed, including 30 domestic, five inbound, and three outward transactions.
During Q3 CY22, SaaS and EdTech saw the most M&A deals, with nine in SaaS and seven in EdTech.
Wolves India, Harappa Education, Exampur, and Centum Learning were the top four acquirers this quarter, according to upGrad.
Global and Indian unicorns: Only two start-ups in India achieved unicorn status in Q3 CY22, matching a global trend of fewer new unicorns this quarter.
Globally, 20 unicorns were created in Q3 CY22, with SaaS accounting for 45% of them. This quarter saw the addition of no new decacorns.