‘Harsh Funding Winter’ Pushed VC Funding In India Below $1 Billion in July 2022, Finds GlobalData

July 2022 was the first month this year when the total venture capital (VC) funding raised by Indian startups fell below $1 billion, according to a new report released by London-headquartered GlobalData.

“Until recently, the largest venture capitalists and private equity players in the world were scrambling to grab a share of the Indian startup ecosystem, which was touted as a promising alternative to China. However, the harsh ‘funding winter’ has reversed the fortunes,” stated the intelligence provider.

As per an analysis of GlobalData’s Financial Deals Database, VC funding value in July fell down to $907.5 million, undergoing a 58.7 per cent reduction, with the deal volume declining by 9.6 per cent compared with June 2022. Further, the cumulative announced VC funding deal volume during January to July 2022 was 1,108 and the corresponding disclosed funding value stood at $16.5 billion, found the analysis. “In addition to the volatile market conditions, investors’ shift in focus towards sustainable business models and profitability seem to be taking a toll on the VC funding activity in India,” said Aurojyoti Bose, lead analyst, GlobalData.

The average deal size more than halved from $15 million in June 2022 to $7 million in July as there was a drop in the volume of big-ticket deals during the month, added the report. Notably, there were only two VC funding deals valued over $100 million last month: first, EV ride-hailing firm BluSmart Mobility raised $250 million from investors including BP’s venture capital division; second, Credit-card based fintech firm FPL Technologies raised $102 million in a Series D round led by Singapore’s Temasek through MacRitchie Investments.

According to Bose, VC funding activity has been impacted across the several key markets globally due to the prevailing market volatility and geo-political headwinds, and India is not an exception to it. He believes that the trend suggests that “funding winter” may be a cyclical phenomenon, but for the time being wary investors continue to be cautious about leading the investment rounds.