A report from Software Technology Parks of India STPI said that there were 1,076 deals in India that invested about $33.3 billion in the second quarter of FY22.
The investment in cities outside Tier I stood at $14.5 billion over 238 deals. The top sectors that have been well performing well in Tier II, III and IV cities are enterprise tech, retail tech and health tech, according to the report.
India is the third largest ecosystem of start-ups after the US and China. The number of start-ups registered with the Department for Promotion of Industry and Internal Trade has increased by 133 per cent in the last six years from 471 in 2016 to 75,442 in 2022.
After braving two and and a half years of the COVID 19 pandemic, funds infused reached an all-time low in the first two quarters of fiscal year 2022. In September 2022, Indian startups raised only $752 million, down 83 per cent as compared to the year-ago period, according to data shared by Tracxn.
The number of funding rounds went down by 57 per cent compared to a year ago. Funding dropped 15 per cent over August 2022, and fell 15 per cent on a month-on-month basis.
Not all gloom and doom are all that is going to happen.
The overall scenario is not all gloom and doom. In October, India saw its first increase in start-up funding, after nine months of exhibiting a downward trend, though still down by 69 per cent year-on-year. Indian start-ups raised $1.08 billion in capital, up 39 per cent as compared to September 2022, according to data shared by Tracxn.
Even though late-stage funded start-ups have taken measures to cut down expenses and become profitable in the wake of a funding crunch, the scenario is different when it comes to early-stage ones.
Rajiv Srivatsa, Partner at Antler, said in an interview with Business Today that they are investing more in early-stage start-ups than ever before. The ticket size of the investments has gone from 200 k to 300 k on average. He said that the ecosystem has improved now, because early stage funding has not been impacted at all. There are fair expectations now that serious people are becoming founders, valuations have stabilised and there are fair expectations. Srivatsa said that one of the biggest changes he has seen is that now investors are spending more time with their founders. There is no hype around closing deals quickly and the focus is on building a relationship with the founder especially if you are coming in at the early stage staying for at least 10 years.