Thanks to SaaS, Chennai remains unperturbed by funding winter, claims report

The funding winter may have been sending chills across the start-up ecosystem, but it appears not to have penetrated Chennai’s humid climate. According to a report by global consulting firm PricewaterhouseCoopers (PwC), while metro cities such as Delhi, Mumbai, Bengaluru, Pune and others saw a decline in the number of start-up deals, Chennai, on the contrary, saw an uptick. 

In the second half of the calendar year 2022 (H2CY22), 19 Chennai-based start-ups raised funds. This number reached 24 in H1CY23.

The report attributed this growth to funds coming into the Software as a Service (SaaS) sector. SaaS remains one of the highest-funded sectors in H1CY23. While the sector saw a 21 per cent decline in funds raised compared to H2CY22, it still managed to contribute about 30 per cent to the total funds raised by start-ups this year (till June). 

Taking a stock of the ecosystem, PwC also highlighted that funding continues to decline. In 2023, the funding decreased by 36 per cent standing at $3.8 billion compared to $5.9 billion in the second half of last year. The deal counts continued to slide as well. 

Commenting on the current scenario, Amit Nawka, Start-ups Leader and Partner at PwC, said, “Funding in the Indian start-up ecosystem continues with cautious optimism. During the last few quarters, investors have supported their portfolio companies by doubling their investments into companies that are showing good growth but have decided to stay away from inducting new investors due to adverse market conditions.”

Nawka also added that an increase in carrying out due diligence processes by investors has been witnessed. “These are driven by the recent financial misreporting issues that have come to light, and the market conditions when investors are able to perform a thorough due diligence to differentiate between start-ups and make more informed investment decisions,” he said. 

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