Startup Funding Is Shrinking, Massive Layoffs, Fewer Unicorns: Huge Cash Crunch In The Indian Startup Sector.

Startup Funding Shrinking, Massive Layoffs, Fewer Unicorns: Huge Cash Crunch In The Indian Startup Sector.

Over 1,500 deals helped businesses raise $42 billion in investment in 2021. They had never raised as much money as they did now. In addition, 44 new startups raised $21.8 billion in investment, joining the “unicorn club.”

Inc42’s latest “Indian Startup Funding Report Q3 2022,” says that Indian startups have raised a total of $134 Bn in funding so far. This is almost twice as much as the $58 Bn they raised by the end of 2019. From 2014 to 2021, the amount of money that Indian startups raised grew at a CAGR of 49%. But the ongoing funding winter caused by a slowing economy around the world has stopped this funding momentum in its tracks.

A “unicorn” is a company that is worth more than $1 billion, and since 2018, India has already seen an average of ten startups a year reach this status. A new report from PwC India says that between April and June of 2022, investments dropped by as much as 40% to $6.8 billion. According to Raj A. Kapoor, founder of the think tank India Blockchain Alliance, “the strengthening of the dollar versus the Indian rupee and the increase in Indian lending rates are also to blame.”

Now that the startup funding winter is getting clearer, there are fewer new unicorns being created. Crunchbase data shows that there were only 11 new unicorns in the world in August 2022. This is a big drop from August 2021, when 45 new unicorns were added. Even compared to the month before, there were fewer new unicorns in August than in July 2022, when 14 companies reached a valuation of $1 billion. In February of this year, 56 new unicorns came into existence. Crunchbase says that this is a clear sign that the market for venture capital is slowing down.

Six of the eleven new unicorns born in August are from the United States, two are from China, and one comes from India, Indonesia, and South Korea. The companies are in many different fields, such as ride-hailing, real estate, electric vehicles, marketplaces, and more. Shiprocket, a logistics startup backed by Zomato, was the only Indian startup to become a unicorn last month. It did this by raising $32 million in a Series E round. Based on data from Tofler, the startup is worth $1.3 billion right now.

Even though almost half of the year is still left, 17 startups have already become “unicorns” this year. At the beginning of the year, things looked good for startups, corona cases were going down, and countries were opening their borders. However, a sudden war between Ukraine and Russia threw the whole world into chaos. In Q2CY22, only 4 startups were able to raise enough money to become “unicorns.” In line with a general trend, there were fewer new unicorns in the last quarter. According to Kapoor, “Many macro indices indicate that the economic system is gradually improving and that it will experience a lengthy “crypto winter.”

Industry experts think that prices will become fairer and that a lot of wheat will be separated from the chaff. There won’t be as many large strategic and secondary transactions in the future. Also, IPO exits will likely be delayed or put off, and valuations will likely go down. Investors are still thinking about what happened with Paytm. On November 8, 2021, the price of Paytm when it was first sold was 2150. Today, it’s only worth 697. The sharp drop in value is a red flag for venture capitalists.

In the world, there are about 1200 unicorns. About 108 are in India. The SaaS sector is where most of them work, followed by the Fintech sector. The report said that four companies, including upGrad, Zepto, CoinDCX, and Turtlemint, each raised more than $100 million in Mumbai. “Due to current federal policy, market liquidity has dropped significantly, which has temporarily stopped funding,” said Gaurav Mehta, the founder of an online crypto tax solution called Catax- Simple Crypto Taxes. Inc42’s numbers show that 41 of India’s later-stage start-ups have fired 12,526 people this year because they didn’t get enough investment.

In 2022, startups laid off nearly 77,000 employees.

Companies worldwide are laying off workers because business growth is slowing and labour costs are increasing. Companies of all sizes have been forced to cut costs and staff, and startups are no different. The report showed that startups let go of nearly 77,000 workers in the first nine months of the year. The worst-hit industries are food and transportation. Most people lose their jobs in May, June, and July.

In 2022, startups were still getting back on their feet after Covid-19, which caused the first big wave of layoffs. During this time, nearly 11,000 jobs have been lost in the food industry. This has hurt startups the most. With almost 8,700 jobs lost, the transportation sector came in second. After that, there are 7,800, 7,200, and 7,000 layoffs in the retail, healthcare, and finance industries, in that order.

According to the most recent OECD report, the economy will grow by 6.9% in FY 2022–2023 and by 6.2% in FY 2023–2024. Once things get back to normal on the world stage, the investors are sure to come back. Due to the lack of cash, many businesses are struggling to stay in business right now. People think that only a few companies have enough money to take on the whole market. In NCR, seven companies raised more than $100 million each: Robotics, Absolute Foods, Delhivery, Stashfin, Rario, Gray Orange Fashinza, and PhysicsWallah.

edited and proofread by nikita sharma