普华永道：2022年第三季度印度初创企业交易报告_21页_3mb

Summary of India Start-up Deals Tracker Q3 CY22

Core Content

This report provides an overview of the Indian start-up funding landscape during Q3 CY22, highlighting trends in funding activity, sector performance, M&A activity, and government initiatives. It also discusses the global context of venture capital (VC) and the increasing importance of Environmental, Social, and Governance (ESG) factors in start-up valuation and investment.

Main Funding Trends

• Total Funding: Indian start-ups raised USD 2.7 billion in Q3 CY22, marking a two-year low.
• Deal Count: 205 VC/PE deals were closed in Q3 CY22.
• Average Ticket Size: The average deal size dropped to USD 13 million, a decline from USD 23 million in Q2 CY22.
• Stage Breakdown:
  • Growth- and Late-stage Deals: Comprised 79% of total funding, with 30% of total deal count.
  • Early-stage Deals: Accounted for 21% of total funding (USD 567 million) and 70% of total deal count (146 deals).
• Sector-wise Breakdown:
  • FinTech, SaaS, and EdTech remained the top sectors, collectively contributing 67% of total funding.
  • Top Sectors in Q3 CY22: FinTech, SaaS, EdTech, D2C, and E-commerce B2B.
  • Unicorn Status: Two new unicorns were created in Q3 CY22 – OneCard and Shiprocket, bringing the total number of active unicorns to 84 as of September 2022.

Key Observations

• Funding Winter: The Indian start-up ecosystem continues to experience a funding winter, with a 59% decline in value and 28% in deal count compared to Q2 CY22.
• Sector Performance:
  • FinTech saw a 60% decline in funding compared to the previous quarter.
  • EdTech showed a positive trend, with UpGrad raising USD 225 million.
  • D2C and E-commerce B2B also experienced declines, though Lenskart and VeGrow stood out in their respective sectors.
• M&A Activity:
  • 38 M&A deals were executed in Q3 CY22, with SaaS and EdTech being the most active sectors.
  • upGrad led the M&A activity with four acquisitions, and Torrent Pharmaceutical made the largest deal by acquiring Curatio Health for USD 263 million.
• Global Context:
  • Globally, 20 new unicorns were created in Q3 CY22, with 45% from the SaaS sector.
  • Global Dry Powder: Over USD 562 billion is available with VC firms, indicating potential for future investment cycles.
  • India's Position: India remains a top start-up hub with strong talent, consumer base, and digital adoption.

Government Initiatives

• Startup India Initiative:
  • Over 78,000+ start-ups have been recognised across 656 districts.
  • Seed Fund Scheme (SISFS): Provides INR 9,450 million for proof of concept, product trials, and market entry.
  • Credit Guarantee Scheme (CGSS): Offers a guarantee of up to INR 100 million for eligible start-ups.
• GeM (Government e-Marketplace):
  • 15,362 start-ups have registered, receiving over 1.5 lakh orders worth INR 9,066 crore by September 2022.
• Regulatory Reforms: Since 2016, 53 reforms have been introduced to support start-ups through easier compliance, capital raising, and investment.

ESG Integration for Start-ups

• ESG Importance: ESG is becoming a key factor in start-up valuation and investment.
• Investor Trends:
  • 72% of PE firms and VCs screen for ESG risks and opportunities.
  • 90% of investors are concerned about diversity and inclusion in their portfolio.
• Benefits of ESG:
  • Attract Investors: ESG-compliant companies are more likely to attract investment.
  • Improve Value: ESG ratings can improve valuations by 400–650 basis points.
  • Build Trust: Transparent ESG disclosures enhance brand reputation.
  • Increase Sales: 76% of consumers in India, Brazil, the US, UK, and Germany are willing to discontinue relationships with companies that neglect ESG.
  • Improve Profits: ESG can lead to cost optimisation through resource efficiency.
  • Lower Cost of Funds: ESG-compliant start-ups can access USD 1 trillion in sustainable finance, with a pricing advantage of 10–70 basis points.

Future Outlook

• Capital Availability: More capital is expected to flow into India from January 2023, but with increased selectivity.
• IPOs and Exits: IPOs are anticipated to resume in 2023, with moderate pricing.
• Consolidation Era: A period of consolidation is expected as investors focus on sustainable growth and profitability.
• Preparation for Recession: Founders are advised to focus on processes, culture, and governance to survive and thrive in a more selective environment.

Conclusion

The Indian start-up ecosystem is navigating a challenging funding environment, marked by a decline in both value and volume of investments. Despite this, the ecosystem remains robust, supported by a large talent pool, growing consumer base, and strong digital adoption. The government has introduced several initiatives to support start-ups, and ESG is increasingly being integrated into investment decisions. With a significant amount of dry powder and the potential for future investment cycles, the ecosystem is well-positioned for recovery and growth.