Total start-up funding drops 35% in 2022; fintech, edtech among worst hit sectors: Report

Start-ups funding in India dropped 35 per cent to $24.7 billion in the January-November period of 2022, from $37.2 billion in the same period last year, reveals a new report by data platform Tracxn.

The 'funding winter' began in the fourth quarter of 2021 as investors became extremely cautious of their fund deployments due to rising interest rates and fear of a worldwide recession. The significant drop in funding is attributed to a decline in late stage investments, which fell by 45 per cent from $29.3 billion in Jan-Nov 2021 to $16.1 billion this year. The slowdown is slowly catching up with seed stage rounds too which have contracted by 38 per cent so far this year as compared to the previous year.

As per ‘Tracxn Geo Annual Report: India Tech 2022’, fintech, retail and edtech were some of the worst affected sectors. Funding to fintech and retail sectors decreased 41 per cent and 57 per cent respectively this year compared to the same period in 2021. Fintech sector saw a major policy change by RBI, prohibiting non-bank fintech businesses from loading their prepaid instruments using credit lines. This has impacted the business model of start-ups like Slice and Uni Pay. Besides, the significant drop in asset prices of crypto industry has also contributed to the sector’s troubles.

Edtech is another sector that has seen a significant drop in 2022, with funding falling by 39 per cent compared to the same period last year as demand has slowed down significantly since schools and colleges started reopening after the pandemic. About 70 per cent of edtech funding in 2022 was made up of five $100+ million rounds raised by BYJU’s, Upgrad, LEAD School and PhysicsWallah. Byju’s which raised $1.2 billion in 2022 from existing investors, accounted to almost 50 per cent of the total funding received in the edtech sector.

The number of funding rounds dropped 30 per cent from 2647 in Jan-Nov 2021 to 1841 in 2022 year to date (YTD).

The number of $100+ million funding rounds has dropped by 35 per cent to 55 in 2022 as compared to 85 in the same period last year. Notable large ticket rounds include BYJU’s which it raised $1.2 billion in two $100+ million rounds, followed by VerSe Innovation (the parent company of news aggregator Dailyhunt and short-video platform Josh) and Swiggy which raised $805 million and $700 million rounds respectively in 2022.

With a total of 10.8 billion raised across 592 rounds, Bangalore led the maximum total funding raised followed by Mumbai ($3.9 billion) and Delhi-NCR ($2.6 billion) in 2022.

The number of new unicorns stood at 22 as compared to 46 in the previous year.

Top funded business models this year include online test preparation courses ($1.2 billion), vernacular content sharing platforms ($1.14 billion), ultra-fast grocery delivery platforms ($1.14 billion), hyperlocal delivery platforms ($959 million) and food ordering platforms ($700 million).
 

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