In the first half of 2020, which ended on June 30, the funding of Indian start-ups dropped by 29% from US$ 5.9B in H1 2020 to US$ 4.2B in H2 2020. According to Tracxn’s India-Tech Semi-Annual Fact Sheet, this marks India’s worst half funding in the last three years.
Start-ups have been hit hard by the economic upheaval caused due to the lockdown. All three major stages of funding- growth stage, late stage and seed stage- witnessed a negative growth of -52%, -21% and -3% respectively. In the first six months of 2019, six start-ups’ valuations crossed US$ 1B. On the other hand, only 3 unicorns emerged in first half of 2020- Nykaa, Pine Labs and First Cry.
Compared to the first-quarter of 2020, the second quarter witnessed a decline of 74% in total start-up funding in India. This is due to the pandemic-induced lockdown. In addition to the adverse impact of the pandemic on the funding, the Indian start-ups also shed a large chunk of their workforce. Indian start-ups on an average fired 22% of their total employee count during the lockdown adding to the major unemployment in India.
Startups in IndiaMoreover, India’s rising geopolitical tensions with China have made it even more difficult to raise capital from Chinese investors, who were an active participant in the economy of India.
A few outliers such as OYO (US$ 806M), RenNew Power (US$ 450M), FirstCry (US$ 296M) and others have boosted the aggregate value of the total funding in H1 2020. Therefore, if one does not take into account the outliers contribution, the total value of funding in H1 2020 stands at just US$ 3.2B.
However, even in the tough circumstances, there are a few fintech, edtech and consumer services start-ups. They have managed to gain investors as demand of their products and services are increasing in the post-pandemic world. These three sectors have witnessed a rise in their deal count at the seed stage. They are edtech (175%), fintech (26%) and consumer services (7%) compared to H2 2019.
A few start-ups that have raised funding in this tough time are:
Bira91: In April, Bira91, the craft beer start-up, raised US$ 30M from Sequoia India and Belgium-based investment firm Sofina as part of its ongoing Series C round.
Fittr: In April, Pune-based fitness start-up, Fittr raised US$ 2M in Pre-Series A funding from Surge.
Nykaa: In May, Mumbai-based online beauty-turned-omnichannel lifestyle retailer Nykaa, raised US 7M from its existing primary investor Steadview Capital.
Shiprocket: In May, tech-enabled logistics aggregator for D2C sellers Shiprocket announced its Series C funding round of US$ 13M.
