Indian startups raised at least $1.38 billion in venture capital funding across 76 transactions in March, down about 8 per cent from February, according to proprietary data compiled by DealStreetAsia.
Fundraising by startups is likely to see a decline over the coming months as COVID-19 outbreak weighs down dealmaking. Since investments are worked upon for several months before they are finally sealed, the real impact would be visible only in the coming quarters.
Indian startups had garnered $1.5 billion in February across 75 deals, and at least $1.45 billion through 78 venture capital investments in January.
Of the total deals clocked in March, the value of as many as 16 transactions was not reported.
The joint investment by Japanese conglomerate SoftBank and RA Hospitality in Indian hospitality major Oyo Hotels & Homes (OYO) marked the single largest deal of the month, accounting for over 58 per cent of the total deal value in March. The transaction marked SoftBank’s second investment in 2020 after it pumped in about $300 million in baby and mother care products retailer FirstCry in February.
In terms of volume, the hospitality sector witnessed only two VC deals.
Hospitality has been among the worst-hit industries in India and globally due to the coronavirus outbreak. The Indian hospitality sector is staring at a loss of $4.2-4.7 billion in revenues due to the pandemic, per hospitality consultancy Hotelivate.
Financial services, which comprise fintech and insurtech, was at the forefront this time and raised at least $241.8 million across 21 deals. Another active sector was healthcare and pharmaceuticals, which raised at least $155 million through eight transactions.
Together, the three segments – hospitality, financial services and healthcare and pharmaceuticals – mopped up about $1.2 billion, accounting for about 88 per cent of the deal value.
Edtech, foodtech take a backseat
Even as edtech startups are making most of the current pandemic, only four startups in the sector, namely CollegeKhabri, Univariety, Lido Learning, and Oda class, raised funding — a mere $4.1 million — in March compared with $355.4 million in February.
This is despite the fact that the sector is witnessing significant traction in the past few weeks with the virus crisis deepening. As educational institutions across the country have been asked to shut down until further notice, edtech startups such as BYJU’S, Vedantu, Toppr, and Lido Learning have started offering various online courses for free to help students keep learning remotely in these tough times. These platforms have reportedly seen a sharp spike in student engagement and enquiries on their platforms.
Besides hospitality, another industry which has been hit hard owing to COVID-19 is the $64-billion e-commerce industry. Companies such as Amazon and Walmart-backed Flipkart are facing tough times as they have been asked to temporarily suspend their services in many parts of the country. Lockdown permits Indian e-tailers to sell only essential items on their platforms.
E-commerce startups garnered $93 million in funding through seven transactions in March. However, the halt in sales of non-essential items due to the coronavirus-led lockdown will cost e-commerce majors nearly $1 billion hit in gross sales, the Times of India recently reported quoting market research firm Forrester.
Fewer late-stage funding deals
Indian startups raised about $62.87 million through 21 pre-Series A and Series A funding rounds compared with $61 million across 20 transactions in February.
Companies at and post-Series B round collected an aggregate of about $1.12 billion – nearly 81 per cent of the total deal value – through nine investments against $1.3 billion through 26 investments a month ago.
The collapse of WeWork’s initial public offering and the disappointing listing of Uber have made late-stage investors lower their risk-appetite and push their portfolio companies towards profitability. In India, we have seen this play out already in case of SoftBank-backed hospitality company OYO and ride-hailing major Ola.
There were about six angel and pre-seed funding deals that raised a total of $3.8 million in March. Meanwhile, in terms of seed-stage deals, while there was an increase in the number of transactions over February, the total value raised by startups stood at a mere $10.4 million in March. This is a sharp drop over January when seed-stage startups recorded total funding of over $34 million across 30 transactions.
The biggest seed round was the $4.7 million raised by Bengaluru-based fintech startup FamPay from Y Combinator, Venture Highway, Sequoia India and Global Founders Capital (GFC). Other startups that raised a seed round in March include automation tech platform UnboxRobotics Labs Pvt. Ltd, cotton-wicks manufacturing startup OM Bhakti, ID verification and data collection startup Anaxee Digital Runners, Spectacom Global Pvt Ltd, and DesignX, among others.
Most active startup investors
Storied venture capital firm Sequoia Capital remained the most active VC firm in March, backing at least six startups. This is the third consecutive month that the Silicon Valley firm has managed to occupy the top slot. The startups it financed during the month are Leap Finance, Trell, Airmeet, Salesken, FamPay, BankBazaar.
In a note to founders and CEOs last month, Sequoia had termed the coronavirus pandemic as the ‘Black Swan of 2020,’ and has asked its portfolio companies to brace themselves for turbulence.
Venture capital firm Accel was the second most active investor backing at least five startups, including CureFit, QTalk, Juspay Technologies, Flickstree, and Spinny.
|Investment Company||Deal Volume||Total Value of Particpaited Deals (USD)|
|Sequoia Capital||6||27.4 million|
|LGT Lightstone Aspada||3||63 million|
|SAIF Partners||2||45.2 million|
VC deals worth $50m and 0ver
There were only three startups, which made it to the $50-million-plus club in March. These include travel giant OYO, fitness startup CureFit, and financial services firm Vivriti Capital. Meanwhile, only OYO and CureFit garnered over $100 million in funding during the month. In February, at least eight companies had made it to the $50-million-plus club, while four made it to the $100-million club.
|Startup||Headquarter||Investment Size (USD)||Investment Stage||Lead Investor(s)||Other Investor(s)||Sector|
|OYO||Gurugram||807 million||Series F||SVF India Holdings, RA Hospitality||-||Hospitality|
|CureFit||Bengaluru||109 million||Series D||Temasek Holdings Pvt Ltd.||Accel Partners, Chiratae Ventures, Castle Investments, Unilever Swiss Holdings, Epiq Capital, Pathiti Investment Trust, GableHorn Investments, Ascent Capital||Health & Wellness|
|Vivriti Capital||Chennai||50 million||Series B||LGT Lightstone Aspada||-||FinTech|