Startups witness drop in VC investments between April-July: Report

Venture capital investments in Indian startups have witnessed a significant drop between April and July this year, reflecting the tough going for businesses in the current Covid-19 pandemic-induced economic downturn. 

Early-stage Indian startups managed to close 40 Series A deals worth $156 million during April to July, said a Mint report based on data from Venture Intelligence. This is a 62.9% drop when compared to 66 deals worth $421 million closed during the December to March period. 

During the April-July period, Series B funding dropped to 33 deals worth $320 million while only 22 Series C funding rounds worth $338 million were closed. At the end of March, startups at Series B stage had raised $485 million collectively across 42 deals. 

The report did not mention the deal sizes of large scale companies who are in their Series D stage, and beyond. 

A KPMG report also said that India witnessed a contraction in VC-focused fundings in Q1 2020. Overall, the deal size was reduced to $2.2 billion from $6 billion in Q4 2019, which included mega deals -- a $1 billion funding round in Paytm and a $500 million round in Udaan. 

Besides the telltale effects of the pandemic on the economy and in turn on the startup ecosystem, restrictions put on Chinese investments by framing stringent foreign direct investment rules this year by India have also led to a fall in VC investments. 

Taking these factors into consideration, the future does appear a bit challenging for VC investments flowing into Indian startups. Nonetheless, India has seen a boom in the edtech segment during the Covid-19-hit lockdown and its aftermath with big-ticket investments and M&A deals inked and celebrated.

Byju’s has become the favored child, raking in over $400 million this year, acquiring WhiteHat Jr and in talks to take over DoubtNut. Unacademy went on to acquire PrepLadder, CodeChef, and Mastree. Toppr also gathered Rs 350 crore in its Series D round and ClassPlus too is in advanced talks to raise a $15 million round.