Startup funding takes a tumble in May to $1.7 Bn: Entrackr Report

Indian startups have been going through their toughest time as investments have been witnessing a sharp fall in the past couple of months after blockbuster fundraising. This has meant mass layoffs across more than a dozen startups, consolidations for a few, and shutting shop for some. 

Indian startups have managed to raise $1.74 billion through 114 deals in May, according to our data tracking platform Fintrackr. These include 33 startups in their growth stage, and 81 in early-stage and 16 undisclosed deals.

This is a sharp fall of more than 34% in total funding as compared to $2.65 billion in April. In March, the total investments in Indian startups was recorded at $4 billion. The current market conditions such as the lack of larger rounds and delay in funding of some startups have emerged as the major reason behind this steep decline.

In Entrackr’s monthly funding report, here are details of the top 10 deals in both the growth stage and early-stage investments in May.

The details of all 130 deals can be found here.

Top 10 growth stage deals

With a $200 million Series D round, quick commerce startup Zepto was at the top of the list in May. This was followed by Ather Energy, GreyOrange, Country Delight and Fashinza which raised $128 million, $110 million, $108 million and $100 million respectively. 

In April, DailyHunt’s parent VerSe Innovation alone raised $805 million. However, there were no deals of such high quantum last month.

Top 10 early-stage deals

Around 81 early-stage startups raised funds worth $283 million during May as compared to $465 million in April and $455 million in March. The top 10 early-stage investments include electric ride-hailing platform BluSmart, SaaS platform Toplyn, fintech startups Wint Wealth and CoinShift, and D2C brand BlissClub among others.

Lenskart’s subsidiary Neso Brands, which is a Singapore-based startup, was in the news for its $100 million seed funding round.

Average deal size

The average deal size also saw a decline in May as compared to the previous months. As per Fintrackr’s analysis, the average deal size of disclosed fundings was recorded at around $15.29 million in May against $21.7 million in April, $31.7 million in March, $25.4 million in February and $26.5 million in January this year.

Only one unicorn and ESOP buyback in May

Indian media was in full swing after Open, the neobanking platform became the 100th unicorn from the country on May 2. However, it was the only unicorn in the past two months. In the first three months of 2022, 16 startups became a part of the coveted club. 

This can be gauged from the investment patterns of Tiger Global and SoftBank – the unicorn makers of 2021 – in the ongoing calendar year. Where SoftBank had already disclosed that it would go slow this year, Tiger Global has shifted its focus to early stage or smaller rounds. As per data compiled by Fintrackr, Tiger Global was the lead investor in only two out of 17 startups that turned unicorns this year.  Overall, the New York-based fund has taken a back seat when it comes to large or $100 million plus rounds.

Interestingly, Zepto could have gone past the $1 billion valuation mark easily from $570 million in the previous round. It has turned out to be the third startup to fall short of a $1 billion valuation after Turtlemint and bike taxi cum logistics platform Rapido. 

Moreover, a couple of bootstrapped companies are on the verge of becoming unicorns. PhysicsWallah, which offers online and offline courses and study materials for JEE, NEET and other exams, was in talks to raise around $100 million at unicorn valuation. Earlier this month, Kota-based ALLEN Career Institute scooped up a $600 million round from Bodhi Tree Systems. The company, however, did not disclose its valuation. Entrackr was the first to report about their maiden funding rounds.

While there were no ESOP buyback events in April, May was $75 million worth of ESOP buyback announced by Razorpay. It was a secondary transaction where Razorpay did not participate.

In March, over half a dozen startups including Pine Labs, Nobroker, CoinSwitch Kuber, Rebel Foods, Fleetx, Krystal.Ai and Jupiter had announced ESOP buyback or liquidity program.

Overall ESOP buyback in the first five months of 2022 is around $175 million.

City wise deals

Bengaluru was on top in terms of the number of startup deals in May. The startups based out of the city raised around $574 million across 57 deals or 33% of the total amount raised in the period. During the period, Delhi-NCR-based startups led the pack in terms of funding, raising over $666 million across 30 deals; they were followed by Mumbai, Chennai and Pune with 22, 8 and 6 deals respectively.

Segment-wise deals

Fintech was the top segment in terms of the number of fundraising instances in April with 21 deals followed by D2C brands, healthtech and SaaS. The complete breakdown of deals across segments in April can be seen above.

Mergers and Acquisitions

In the past couple of months, several growth and late-stage startups such as Unacademy, Meesho, Vedantu, Ola, mFine, OkCredit and Trell have fired over 8,000 employees as per media reports. A couple of startups such as Lido and Udayy are on the verge of shutdown and it forced many to go for merger and acquisition opportunities. As per Fintrackr’s data, 19 startups have been acquired or merged with larger companies in May. The figure was 15 in the previous month.