Investment in startups slide significantly in March quarter

As expected, the COVID-19 pandemic has started to choke the venture capital investment flows into startups during the quarter which ended in March.

Investments fell 22% in value to $1.74 billion in the first quarter of 2020 as compared to $2.22 billion in March 2019, according to data from a research service platform Venture Intelligence.

The number of investments went down by 35.71% to 126 during the period from 196 last year.

"While VC investors in India seemed to have shrugged off the chilly winds emerging from the US (owing to the WeWork IPO fiasco and Uber stock price slide of late 2019), the Coronavirus contagion infected the ecosystem sharply starting mid-March," said Arun Natarajan, founder of Venture Intelligence, in a statement.

"We can expect VC investors to be highly selective when it comes to making new investments in the months ahead and to be focused more on helping existing portfolio companies survive the downturn," he added.

During the first quarter of 2020, fintech firms emerged as the most attractive sector with 19 investments worth $380 million for VC investments followed by health care and e-commerce, which saw 17 and 15 deals respectively.

These sectors also saw a downfall in the number of VC investment deals compared to last year. Edtech was the only sector that witnessed more number of deals in the period than last year.

Fitness platform Curefit, with a $114 million investment, emerged as the largest VC investment during Q1 of 2020. Edtech startup Unacademy scooped the second largest investment of $110 million in a round from General Atlantic and Facebook, along with existing investors.

This is not the first set of data revealing a downward graph of investments in startups in India for the quarter. Tracxn, a platform that tracks startup investments and financials, too had shared data claiming similar trends.

According to Tracxn, funding in startups fell 81.1 per cent to $0.33 billion in March 2020, as compared to $1.73 billion in March 2019.

The number of companies that were funded reduced to 69 this year as against 136 platforms in March 2019. Fintech and Consumer sectors were the top two funded sectors in the period.

Industry experts say that the investment downfall was expected and some sectors such as travel, cloud kitchen, lending and ride-hailing will see a slowdown for the whole year.