Funding for Indian start-ups in CY22 was nearly $24 billion, a drop of 33 per cent in comparison to CY21 but was still more than twice the funds raised in CY20 and CY19 each, according to a report by PwC India.
The report titled, ‘Startup Deals Tracker-CY22’ showed that funding of the late-stage deals in CY22 witnessed a decline of 52 per cent. The average ticket size in growth-stage deals was $43 million and late-stage deals were $94 million during CY22.
Early-stage funding however grew by 12 per cent as compared to CY21, showing that despite the global slowdown, investors are still positive about the Indian start-up ecosystem, the report said.
The average ticket size per deal was noted to be $4 million. Additionally, the SaaS segment witnessed an increase of 20 per cent in funding values during CY22 compared to CY21 and accounted for nearly 25 per cent of all funding activity in CY22.
Amit Nawka, Partner-Deals & India Startups Leader, PwC India, said, “Despite the funding slowdown, some areas like SaaS and early-stage funding have remained upbeat. With significant dry powder waiting to be invested, it seems likely that the funding scenario will begin to normalise after 2-3 quarters.”
The amount of committed but unallocated capital a firm has on hand is known as dry powder.
Many start-ups are using this time to tighten operating models and optimise their cash runway by deferring discretionary spending and investments, Nawka added.
‘Dry powder’ stats
Venture capital dry powder pile continued to grow globally and stands at approximately $590 billion and a majority of these funds were committed in CY21 and CY22.
The build-up of dry powder is due to a market pullback by VC funds that are picky about their investments. The focus is on companies that have strong unit economics and a path to profitability, the report said.
According to the report, a 17 per cent decline was witnessed in mergers and acquisition (M&A) deals during CY22 compared to CY21 in terms of deal volume, with 60 per cent of the transactions being contributed by the top three sectors — SaaS, e-commerce+D2C, and edtech.