The global slowdown in funding continues with start-up funding in India in Q3 calendar year 2022 (CY22)  hitting a two-year low at $2.7 billion across 205 deals, reveals a new PwC India report.

As per the report, titled Startup Deals Tracker - Q3 CY22, while a decline in funding is noted across all stages of investment – early, growth and late – the decline has been the least in early-stage deals which contributed around 21% of the total funding by value in Q3 CY22 compared to approximately 12% in Q2 CY22, showing that venture capital (VC) firms continue to back the Indian start-up ecosystem.

“It is tough to predict how long the slowdown in funding will last but clearly, both founders and investors are being more selective and cautious in deal-making. In general, early-stage start-ups will be able to raise capital more easily as they are typically more insulated than late-stage deals from fluctuations in the public markets. However, investors have already raised a lot of capital which needs to be deployed and this will ultimately find its way to the Indian start-up ecosystem,” said Amit Nawka, partner - deals & India startups leader, PwC India.

Stages of funding

Growth- and late-stage funding deals accounted for 79% of the funding activity in Q3 CY22 (value terms). These represented 30% of the total deal activity (count terms). 

Average ticket size in growth-stage deals continued to decline and was $32 million during Q3 CY22. 

Early-stage deals accounted for 70% of total funding in Q3 CY22 compared to their 60% share in Q2 CY22 (in volume terms). 

Average ticket size per deal ranged from $4–5 million per deal. In value terms, early-stage deals contributed around 21% of the total funding in Q3 CY22 compared to around 12% in Q2 CY22.

M&A transactions

As many as 38 M&A deals involving start-ups were executed in Q3 CY22 - 30 domestic, five inbound and three outbound deals. 

SaaS and EdTech witnessed the highest number of M&A transactions during Q3 CY22 – nine in SaaS and seven in EdTech. 

Edtech company upGrad has been the top acquirer this quarter with four acquisitions – Wolves India, Harappa Education, Exampur and Centum Learning.

Global and Indian unicorns

Only two start-ups in India attained the unicorn status in Q2 CY22, mirroring a global trend in decline in the number of new unicorns this last quarter. 

Globally, Q3 CY22 produced 20 unicorns and 45% of them are from the SaaS segment. No new decacorns were added in this quarter.