Early Stage Investments in India from July’22 to September’22

The funding environment continues to remain cautious, the investments made during the quarter declined by 32% YoY and by 11% QoQ. Angel Investments also fall by 15% QoQ. The impact can be seen across the stages, due to the tight macro environment marked by high inflation, greater scrutiny of tech spending, and recessionary trends across the western markets.

Key Highlights
Key Highlights

A. Q3’22 recorded 19 early-stage investments of more than $10 Mn, compares to 31 in the same period last year. This reflects a fall of 39%.
B. In the case of deals worth $2 Mn or more, Q3’22 was down by 37% to 82 deals compared to 130 investments last year.
C. Angel investing has also seen impact, Q3’22 has shown 151 angel funding deals, down 32% YoY; Q3’21 represented 221 deals and 15% QoQ; the immediate previous quarter recorded 178 deals.
D. Relatively to last year, the median deal size of Series A and Series B rounds has reduced by 20% and 5% YoY to $7 Mn and $12 Mn respectively. However, series A and B investments reduced YoY to 42 deals and 3 deals respectively.
E. This can be regarded as the confined macro environment that has developed as a consequence of high inflation, greater scrutiny of tech spending (IT and IT-enables start-ups account for 84% of the investments), and recessionary trends across the western markets.

Regardless of the country’s ambitious targets, India’s EV space is at a nascent stage. However, looking at it differently – India offers the world’s largest untapped market, especially in the two-wheeler segment.

100 percent foreign direct investment is allowed in this sector under the automatic route.

In Union Budget 2022-2023 it was announced that battery swapping policy will be brought out and inter-operability standards will be formulated.

Prices of nickel have soared over 100% in the last few days as the Russia-Ukraine war has triggered a shortage of the metal, threatening to disrupt production of batteries for electric vehicles. The increased prices may also drag the margins of the EV industry.

Most Active Investors

Better Capital: 11 Investments; 8 new, and 3 follow-on investments. This included creator data access provider Phyllo ($15 Mn), blockchain gaming platform Lysto for $12 Mn and fintech platform Hyperface for $9 Mn

Blume Ventures and Beenext: 8 Investments each during the Q3’22. Blume made 7 new investments, and Beenext made 3. Blume’s major investments were in Binocs ($4 Mn), Lucidit ($5.3 Mn), and HealthAssure ($6.26 Mn). Beenext invested in Lysto ($12 Mn), TWID, and Lucidit.

3ONE4 Capital: 7 Investments (3 New). Major Investments were made in Eka.Care ($9 Mn)*.

These investors were then followed by Sequoia Capital India and Goodwater Capital who made 6 investments each.

Additional Points:
I. Tech Companies captured investments worth $492 Mn during the latest quarter.
II. Non-tech deals include
a. A $13 Mn investment in EV rapid charging startup Exponent Energy led by Lightspeed.
b. $10 Mn investment in a low-cost loans provider Credit Fairs’ led by LC Nueva’s Fund- LC Nueva AIF.

Evidently, investors have given priority to B2B start-ups (87 deals worth $309 Mn) rather than B2C start-ups (79 deals worth $269 Mn).

  • Enterprise Software led the investments arena by attracting 46 early-stage investments worth $170 Mn, where the largest investment was recorded by Phyllo for $15 Mn.
  • Fintech has been the second favorite sector for investors, catering to 27 investments worth $131 Mn. The largest investment in the Fintech sector was recorded by Jodo at $15 Mn. It is followed by TWID ($12 Mn), and GroMo ($11 Mn).
  • Consumer Brands captured only 17 investments worth $44 Mn led by Drink Prime ($8Mn).
  • D. The Healthcare sector attracted 16 Early-Stage investments worth $64 million, led by the $15 Mn in Eka Care.

Angel Investments

Angel investments have reflected a decreasing trend of 32% at the end of Q3’22. It has recorded a significant fall of 15% from the previous quarter.

Geographical Division of Early-Stage Investments
Bangalore continues to remain the most likable region for early-stage investors. However, progress can be witnessed in Mumbai. With 33 investment deals, start-ups attracted investments worth $118 Mn.

The overall funding environment continues to remain muted on the back of higher inflation and fears of a global recession. Investors are now focusing on the profitability and on reducing cash burn significantly. We can witness some down rounds in the companies which have raised capital at a very high valuation multiple in the recent past.
The listed tech companies’ share prices have also fallen substantially in the last year the same has also resulted in fear amongst the investor group. We expect the funding environment to remain cautious as Fed and other central banks around the world keep tightening the intertest rate to control inflation.

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