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May is the first month of 2022 when startups have raised less than $2 billion

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  • General, Indian Startups raised $13.3 billion between January and May 2022.
  • Some of these big ticket deals from May 2022 were Zepto’s $200 million round, Ather Energy’s $128 million round.
  • India still managed to create more unicorns between January and May 2022 than the year before.

The financing winter started this year in the middle of a heat wave in May. According to a recent report from data analytics and consulting firm GlobalData, May is the first month of the year when total money raised fell below $2 billion.

“The decline in VC funding in May suggests that investors are becoming more cautious about betting and that startups are also realizing the impact of the funding winter. In fact, May also witnessed the announcement of very few major deals above and equal to $100 million,” said Aurojyoti Bose, chief analyst at GlobalData.

Some of these big ticket deals include Zepto’s $200 million round, Ather Energy’s $128 million round and Absolute’s $100 million. In terms of unicorns, only one company — neobanking startup Open — saw its value jump more than a billion dollars in May.

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Overall, Indian startups raised $13.3 billion between January and May 2022.

Indian startups rank next to Chinese counterparts in terms of VC funding value among the Asia-Pacific (APAC) countries during the last five months of 2022.

The financing winter can last one or two years

Money flows to Indian startups have slowed since April due to the aftermath of the Russia-Ukraine war, the impending recession and Fed rate hikes. This is expected to take another 12-18 months, if not 24 months, according to experts.

“Given this environment, capital will be scarce in the coming quarters,” Vamsi Krishna, chief executive officer and co-founder of Vedantu, said in a blog post.

Vedantu, Meesho, Cars24 and MFine have already started laying off their employees and reducing their workforce in an effort to increase their runways. Also, Unacademy has begun to rethink their business model to include more revenue streams.

Early and growth-stage startups will find it harder to fundraise

Although the valuations of Indian startups took a hit in April, 2022 has created more unicorns in the first five months of 2022 compared to the entire year before.

According to a recent report from Tracxn, a market intelligence provider, 14 Indian companies became unicorns – worth more than a billion dollars – in 2022. Last year, that number was 13 during the same period. But it is also important to note that only one startup entered the unicorn club in April and May.

However, the pace returned when PhysicsWallah, Purplle and Leadsquared became unicorns in June. But stakeholders argue that the funds will flow slowly in the short term.

We Founder Circle co-founder Gaurav Singhvi told India that the investors will have limited capital to invest in startups, which will make them even more selective in the companies they want to invest in. The biggest impact of this limited funding would be with early and growth-stage startups, rather than incumbents.


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