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Only 29% Start-Ups Secured Series A Round Between 2015 And 2022: Venture Intelligence

The 'Series A Landscape Report' analyzed over 2,500 start-ups that had raised seed funding between 2015 and 2022, revealing that only 734 firms managed to secure a Series A round, which typically represents the first round of institutional venture capital funding

Only 29% Start-Ups Secured Series A Round Between 2015 And 2022: Venture Intelligence
POSTED ON June 05, 2023 2:13 PM

Less than one in three start-ups that secure seed funding were able to secure follow-on funding in the form of a 'Series A' round, according to a recent study by Venture Intelligence, a provider of data on private company financials, transactions, and valuations.

The study, titled 'Series A Landscape Report', analyzed over 2,500 start-ups that had raised seed funding between 2015 and 2022, revealing that only 29 per cent of these companies (equivalent to 734 firms) managed to secure a Series A round, which typically represents the first round of institutional venture capital funding.

However, the study also highlighted that once a start-upstart-up successfully attracts a Series A round, its chances of raising subsequent rounds of capital significantly improve. For instance, 50 per cent of the companies that secured a Series A during the study period went on to raise a Series B round. 

Furthermore, among start-ups that attracted a Series B round, 62 per cent succeeded in obtaining a Series C round. Impressively, 70 per cent of the Series C-funded companies managed to raise subsequent rounds classified as Series D and beyond. The study provided an 18-month window for companies to secure the subsequent round of funding.

Flow of start-ups through funding rounds
The flow of start-ups through funding rounds

Ganapathy Venugopal, CEO of Axilor Ventures, emphasized the significance of the total number of Series A deals as a reflection of the ecosystem's maturity and a leading indicator for the scale and quality of companies being built. Over the five years from 2017 to 2022, the number of companies securing Series A rounds experienced an 8 per cent compound annual growth rate (CAGR). Despite a funding slowdown in 2022, the number of Series A investments during the year (289) increased by 7 per cent compared to 2021 (which saw 269 investments) and was 30 per cent higher than the seven-year average of 224 deals.

The Venture Intelligence study also identified a list of 'Series A Pipeline Creators'—investors who make seed investments in start-ups that are more likely to raise subsequent Series A rounds. Sequoia Capital India topped this list, which featured strong representation from domestic venture capital firms such as Blume Ventures, Chiratae Ventures, Elevation Capital, and 3ONE4 Capital, as well as specialized seed VC firms like Axilor Ventures, India Quotient, and Kae Capital.

Venture Intelligence
Sequoia Capital India emerged as the leading backer, providing seed funding to 54 start-ups

Sequoia Capital India emerged as the leading backer, providing seed funding to 54 start-ups that subsequently went on to successfully raise Series A rounds during the analyzed four-year period from 2019 to 2022. Blume Ventures followed closely, supporting 31 start-ups that secured Series A funding. 

Chiratae Ventures and Accel India supported 21 start-ups each. Elevation Capital and 3ONE4 Capital completed the top five list. Notably, specialized seed VC firms like Axilor Ventures, India Quotient, and Kae Capital supported 17 start-ups each that went on to attract subsequent Series A rounds.

Sequoia Capital India also claimed the top spot as the most active Series A investor during the four-year period spanning 2019 to 2022, participating in 93 Series A rounds. It maintained its position as the most active Series A investor in the calendar year 2022, with 24 investments. Accel India and Elevation Capital rounded out the top three Series A investors in the 2019-2022 period and calendar year 2022.

Most active seed venture capital investors in 2022
Most active seed venture capital investors in 2022

Regarding seed investments, Blume Ventures topped the list as the most active seed VC investor in the calendar year 2022, making 29 seed investments. Sequoia Capital India held the position of the most active seed investor during the four-year period from 2019 to 2022. 
Accel India completed the top three in both tables, with 56 investments over the four-year period and 20 investments in the calendar year 2022.

Interestingly, Info Edge, through its corporate VC initiatives, emerged as one of the top three most active seed investors in 2022, making 16 such investments and joining Sequoia in the third most active seed investor position.

Elevation Capital led the table of investors ranked by their participation percentage in Series A investments from 2019 to 2022. The firm participated in the Series A rounds of 83 per cent of the start-ups in which it had invested during their seed rounds. Accel India followed closely at 75 per cent, while Chiratae Ventures and Kalaari Capital achieved participation rates of 74 per cent and 73 per cent, respectively.

Arun Natarajan, the founder of Venture Intelligence, highlighted the study's demonstration of the significant maturation of the Indian early-stage funding ecosystem in recent years. Despite the current slowdown, he emphasized that start-ups now have a much richer array of funding options available compared to just three years ago. Natarajan expressed hope that the report would assist founders in selecting the appropriate types of VC investors at each stage, ultimately enhancing the chances of their start-up's success.

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