The global slowdown in funding continues, with start-up funding in India in Q3 CY22 hitting a two-year low at $2.7 billion across 205 deals, as per the PwC India ‘ Start-up Deals Tracker-Q3 CY22’ report. While a decline in funding is noted across all stages of investment—early, growth and late—the decline has been the least in early-stage deals.

These contributed around 21 per cent of the total funding by value in Q3 CY22 compared to approximately 12 per cent in Q2 CY22, showing that venture capital (VC) firms continue to back the Indian start-up ecosystem.

Amit Nawka, partner-deals and India start0ups leader, PwC India, said, “It is tough to predict how long the slowdown in funding will last, but clearly, both founders and investors are being more selective and cautious in deal-making. In general, early-stage start-ups will be able to raise capital more easily as they are typically more insulated than late-stage deals from fluctuations in the public markets. However, investors have already raised a lot of capital that needs to be deployed and this will ultimately find its way to the Indian start-up ecosystem.”

The report stated that growth and late-stage funding deals accounted for 79 per cent of the funding activity in Q3 CY22 (in value terms). These represented 30 per cent of the total deal activity (count terms). 

The average ticket size in growth-stage deals continued to decline and stood at $32 million during Q3 CY22. Early-stage deals accounted for 70 per cent of total funding in Q3 CY22 compared to their 60 per cent share in Q2 CY22 (in volume terms). 

The average ticket size per deal ranged from $4 to $5 million per deal. In value terms, early-stage deals contributed around 21 per cent of the total funding in Q3 CY22 compared to around 12 per cent in Q2 CY22.

PwC also noted that 38 mergers and acquisitions (M&A) deals involving start-ups were executed in Q3 CY22. Of these, 30 were domestic, five were inbound and three were outbound deals. 

With nine in Software as a service (SaaS) and seven in EdTech, these two sectors witnessed the highest number of M&A transactions during Q3 CY22. Edtech upGrad has been the top acquirer this quarter with four acquisitions—Wolves India, Harappa Education, Exampur and Centum Learning.

On the flip side, only two start-ups in India attained unicorn status in Q2 CY22, mirroring a global trend in decline in the number of new unicorns this last quarter. Globally, Q3 CY22 produced 20 unicorns and 45 per cent of them are from the SaaS segment. No new decacorns were added in this quarter.