Funding winter: PE/VC investment in Indian start-ups picks up in Nov 2022, but shows 28% YoY decline

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Private equity and venture capital firms invested $3.5 billion (in 84 transactions) in Indian companies in November 2022, according to Venture Intelligence, a research platform. While the number marks a 35 percent increase from the previous month (October 2022, which saw $2.6 billion invested in 76 transactions), it is still down 28 percent from the year-ago month. In November 2021, $4.9 billion was invested in companies across 105 deals.

With this, Indian companies are set to raise $44 billion cumulatively in 2022, down 32 percent from last year when they raised $64.8 billion during the January to November period (2021). The number of deals has also come down from 1,356 to 1,191 in the last one year.

Venture Intelligence also highlighted that exit deals have also grown 2.7 times this year. VC and PE firms raised nearly $2.5 billion from 25 deals in November, closing 15 deals and raising nearly $0.9 billion, compared to the previous month. The withdrawal value was still 36 per cent lower than in November 2021.

These figures show that funding is slowly increasing this year, but it is still on a decline compared to last year. Thus, the chatter around “funding winter”.

Anas Rehman Junaid, founder and MD of Hurun India, says that “2021 was a crazy year for the asset class.” Calling the year an “aberration”, he says the year 2021 was miraculous to see so many deals closing and unicorns emerging.

However, 2022 and the years from here on out will be different, he noted. “The scenario of high growth among Indian start-ups will diminish as there will be too much focus on fundamentals such as revenue, controlling costs and profitability.”

Junaid also said that this year several start-ups have raised money from large investors. This clearly indicates that “ground-and-grit investors will focus on pure margin,” he says.

Some of the top deals this year include co-working space firm, Tablespace, which raised $300 million from Hillhouse Capital, renewable energy company, ReNew Power, which raised $400 million from the Canada Pension Plan Investment Board, among others.

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