Indian startups raised at least $692 million in venture capital and private equity financing across 74 transactions in April, according to proprietary data compiled by DealStreetAsia. This is about half of what they had raised in March, signalling tepid investor interest in the wake of the COVID-19 outbreak.
Startups raised at least $1.38 billion in venture capital funding across 76 transactions in March as against $1.5 billion in February and $1.45 billion in January.
South Korean gaming company Nexon’s $123-million infusion in New Delhi-based diversified financial services company DMI Group marked the single largest deal in April. Deal value of as many as 17 transactions was, however, not reported.
While the number of transactions remains unaffected, deal value has fallen steeply owing to the challenges being faced by startups across sectors amid the coronavirus pandemic. While many had shut operations temporarily since the onset of the nationwide lockdown on March 25, some are currently operating at mere half the capacity.
As piling costs have depleted cash reserves, some have already announced across-the-board pay-cuts and even instituted layoffs. Several Indian unicorns including Udaan, OYO, and Swiggy are reportedly laying off and furloughing their permanent and contractual staff.
Financial services, also comprising financial technology and insurance, led the deal value and volume in April by raising at least $229 million through 17 transactions. While the food sector has otherwise been hit hard by the pandemic, food and food tech companies raised a total of $131.35 million through seven transactions in April.
After financial services, the edtech sector witnessed the maximum number of deals at 11 raising a total of $38.8 million. E-commerce raised a mere $51.4 million across three transactions, while the Internet sector contributed $33.15 million to the total corpus. E-commerce startups were only allowed to sell essential items on their platforms until the beginning of this month. Sales of non-essential items on e-commerce platforms have, however, begun in green and orange zones.
India is currently in the third stage of lockdown, which ends on 17 May. In the first two phases of the lockdown, e-commerce Flipkart, Amazon and Snapdeal were allowed to sell only essential items like grocery, medicines and healthcare products.
Crisis fuels funding crunch
Except for financial services, foodtech, and edtech, which accounted for about 57.6 per cent of the total funding value in April, most sectors faced a bleak month. Investors have particularly shown a keen interest in backing Indian edtech startups that prove their worth during the current crisis.
Some of the edtech startups that attracted funding during April include Pariksha, SoME, Guvi Geek, Qin1, Vedantu, Expertrons, Pedagogy, and Camp K12. As most schools and educational institutions have been temporarily shut owing to the lockdown, edtech companies are running classes online to keep students engaged.
In the foodtech space, cloud kitchen player Rebel Foods mopped up about $47 million from hedge fund Coatue Management, at a time when food delivery services are staring at a tough business environment with fewer consumers placing online orders, fearing COVID-19 contamination. Swiggy, too, raised $43 million as part of its ongoing Series I round in April from Ark Impact, Korea Investment Partners, Samsung Ventures, Mirae Asset Capital Markets, and existing investors to develop and expand its new businesses.
However, all is not well with other sectors. Over the past two months, more than 250 startups have already shut shop, said a recent Mint report quoting Tracxn data. This number is expected to increase sharply in the coming months. If the coronavirus-triggered crisis lasts longer, more startups may be forced to shut shops as investors have either started delaying investments or are demanding lower valuations as the world grapples with this virus.
India is currently home to 80,000 start-ups, that collectively raised about $10 billion in 2019, Bain & Company said in its report in March. The dry powder availability for VC investing in India was at an all-time high of $7 billion at the end of 2019, indicating likely continued investment activity in 2020, the report added.
Growth-stage deals led funding
In terms of value, growth-stage startups led funding in April. Companies at and post-Series B round collected an aggregate of about $390.55 million – over 56 per cent of the total deal value – through 21 investments.
The single largest corporate investment was made by South Korea’s Nexon into DMI Finance. Another big growth round of $55 million was raised by US and India-based genetic diagnostics firm MedGenome in its Series D financing, which was led by global impact investment firm LeapFrog Investments. Online grocery platform Bigbasket also raised $50 million debt funding from existing investor Chinese e-commerce giant Alibaba Group Holding Ltd.
The immediate future of growth and late-stage financing rounds for startups in India, however, looks bleak as the COVID-19 virus outbreak could stretch beyond a few months, per the industry experts. A slew of growth-stage companies that were in talks with Chinese investors for financing will have to wait as India has tightened FDI norms for neighbouring countries. Chinese investors, including the likes of Alibaba and Tencent, have played a key role in pushing the Indian startups in an aggravated growth phase.
There were about 13 pre-Series A funding deals that raised a total of $17.23 million and about 10 Series A transactions, which together raised $74.1 million. Meanwhile, there were fewer seed-stage deals at 7, which raised $7.97 million. This is because investors are taking a long time to scrutinise fresh investments. They are increasingly becoming cautious about the business ideas they back.
Most active investors
Silicon Valley investor Sequoia Capital topped the investors’ list in April having invested in at least 14 startups. Despite the economic slowdown, the firm seems to be bullish on India’s thriving ecosystem.
|Investment Company||Deal Volume||Total Value of Particpaited Deals (USD)|
|Sequoia Capital||11||142.8 million|
|Falcon Edge||3||46.5 million|
|SAIF Partners||3||43.5 million|
|Omidyar Network India||3||33.9 million|
|Matrix Partners India||3||25 million|
|RTP Global||2||21.6 million|
|IvyCap Ventures||2||7.5 million|
Sequoia Capital India recently mentioned in its newsletter that its existing portfolio across India & ASEAN, raised a total of $2.8 billion in Q1 2020 from a variety of investors. Sequoia also participated in some of these investment rounds. The firm was last reported to be seeking to raise about $7 billion for a set of venture funds across China, India and the US.
Mint recently reported that Sequoia Capital India is closely tracking the ‘rise of direct-to-consumer brands with strong appeal to Asia’s mobile-first millennials’ along with agritech as a segment.
Other investors including Falcon Edge, SAIF Partners, Omidyar Network India, Matrix Partners India, and Amazon made three investments each during the month.
Fewer 50-million-plus deals
There were only three startups, which made it to the $50-million-plus club in April. These include travel giant DMI Group, MedGenome, and BigBasket. The number was the same in March. In contrast, at least eight companies had made it to the $50-million-plus club, while four made it to the $100-million club in February.
|Startup||Headquarter||Investment Size (USD)||Investment Stage||Lead Investor(s)||Other Investor(s)||Sector|
|DMI Group||New Delhi||123 million||Equity||Nexon Co||-||Financial Services|
|MedGenome||India/US||55 million||Series D||LeapFrog Investments||Sofina, Sequoia Capital||Biotechnology|
|BigBasket||Bengaluru||50 million||Series F (Debt)||Alibaba Group Holding||-||E-Commerce|