The amount of money invested in Indian startups fell sharply by 33 percent to $24 billion in CY22 compared to CY21. However, it was still more than twice the funds raised in CY20 and CY19, respectively, the Business line reported, quoting the PwC India report.
The funding of the late-stage deals in CY22 witnessed a decline of 52 percent. However, early-stage funding grew by 12 percent as compared to CY21, indicating that despite the global slowdown, investors are still positive about the Indian startup ecosystem, according to the report.
The average ticket size in growth-stage deals was $43 million and late-stage deals was $94 million during CY22, while the average ticket size per deal was $4 million, the report noted.
The SaaS segment witnessed an increase of 20 percent in funding values during CY22 compared to CY21 and accounted for nearly 25 percent of all funding activity in CY22, it said.
Despite the funding slowdown, some areas like SaaS and early-stage funding have remained upbeat. With significant dry powder waiting to be invested, it seems likely that the funding scenario will begin to normalise after 2-3 quarters, Amit Nawka, Partner-Deals & India Startups Leader, PwC India, was quoted as saying.
Many startups are using this time to tighten operating models and optimise their cash runway by deferring discretionary spending and investments, Nawka added, as per the report.
The venture capital dry powder pile continued to grow globally and stands at approximately $590 billion, and a majority of these funds were committed in CY21 and CY22, the report said.
The buildup of dry powder is due to a market pullback by VC funds that are picky about their investments. The focus is on companies that have strong unit economics and a path to profitability, it added.
According to the report, a 17 percent decline was witnessed in mergers and acquisition (M&A) deals during CY22 compared to CY21 in terms of deal volume, with 60 percent of the transactions being contributed by the top three sectors: SaaS, e-commerce + D2C, and edtech.
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