Total startup funding falls 35% in 2022; fintech, edtech among worst affected sectors: Report

Funding for start-ups in India fell 35 percent to $24.7 billion in the January-November 2022 period, from $37.2 billion in the same period last year, according to a new report from data platform Tracxn.

The “funding winter” began in the fourth quarter of 2021 when investors became extremely cautious about fund allocation due to rising interest rates and fears of a worldwide recession. The significant drop in funding is attributed to a decline in late-stage investment, which fell 45 percent from $29.3 billion in January-November 2021 to $16.1 billion this year. The decline is slowly picking up with seed stage rounds falling by 38 percent so far this year compared to the previous year.

According to ‘Tracxn Geo Annual Report: India Tech 2022’, fintech, retail and edtech were some of the worst affected sectors. Funding to the fintech and retail sectors fell by 41 percent and 57 percent respectively this year compared to the same period in 2021. The fintech sector saw a major policy change by the RBI, which prohibits non-bank fintech companies from loading their prepaid instruments using lines of credit . This has affected the business model of start-ups such as Slice and Uni Pay. Moreover, the significant drop in asset prices of the crypto industry has also contributed to the sector’s woes.

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

The number of funding rounds fell 30 percent from 2,647 in January-November 2021 to 1,841 in 2022 year-to-date (YTD).

The number of $100+ million funding rounds has fallen by 35 percent to 55 in 2022 compared to 85 in the same period last year. Notable big ticket rounds include BYJU’s which raised $1.2 billion in two $100+ million rounds, followed by VerSe Innovation (parent 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 over 592 rounds, Bangalore led the maximum total funding followed by Mumbai ($3.9 billion) and Delhi-NCR ($2.6 billion) in 2022.

The number of new unicorns was 22 compared to 46 the previous year.

Top funded business models this year include online test prep courses ($1.2 billion), linguistic 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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