Explore how long can the funding winter freeze the Indian startup space.
The Indian startup ecosystem, which once entered with a ray of sunshine, is today sailing through turbulent waters. The harsh reality of this space is that they are still stuck in the funding winter, which started way back in 2022 and is far from over.
We will face the harsh truth as we delve deeper into the latest numbers. But is the funding winter here to stay, or will there be times of relief?
Let’s find out.
The funding winter that began in late 2022 is far from over! And the latest data is a shocker for many as it reveals the harsh reality of the startup ecosystem.
The CNBC TV18 report revealed that 2022 India saw 20 unicorns (companies with a valuation of $1 billion) in the first nine months of 2022. But India has not seen any unicorn companies in the last two quarters.
The story does not end here. The early-stage funding rounds have shrunk by 4% QoQ and have experienced a whopping 68% drop YoY. This is a massive hit to startups in their early stages and seeking funding from venture capitalists for their growth, but they cannot do so.
The problem is not just with early-stage startups; startups in their late-stage funding rounds are also not doing well. They have seen a decline of a staggering 79% YoY decline. That’s a significant drop for established startups looking to scale their businesses to the next level.
The overall number of funding rounds has dropped from 816 to 301. That’s a whopping 62.01% drop, indicating that the startup ecosystem is facing challenging times.
Delayed Listing of Startup Companies
The valuation of Indian companies was also questioned by many because everyone has seen how badly the market capitalisation of the newly listed startup fell.
Take the example of a US-based startup company, Rivian Automotive, which was listed in the US in 2021. The company’s valuation was a massive $92 billion, much more than Ford, one of the world’s most reputed and valued automotive brands.
However, the hype was short-lived, and the market capitalisation of Rivian fell sharply, leaving many to question the validity of such lofty valuations.
Similarly, we can relate to many Indian startups which were listed at high valuations, and the real picture was revealed after listing.
This is why, when an Indian startup announces its plans to go public, investors are quick to analyse the DRHP and question its valuation. But with the current funding winter and uncertain market conditions, many startups have postponed their IPO plans. Companies like boAt, Go First, Mobikwick, VLCC, Mamaearth, and others have hence all hit the pause button.
As we look at the current scenario, the Indian startup ecosystem is going through a difficult phase. However, according to CNBC TV18, experts believe this funding winter will only last for a while.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information only. This is not investment advice.