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Indian startup funding fell by 33% for the calendar year 2022, according to a PwC India report titled “Startup Deals Tracker – CY22″.

Last year, Indian startups raised a total of $24 billion while in 2021, the funding raised was $35 billion. Yet, when compared to 2020 at $10.9 billion and 2019 at $12.8 billion, the report noted that it twice the funding was raised in 2022 raised over other years.

The number of startups that raised funds in 2022 was 1,021 while it was 1,106 in 2021—an 8 % decline. Consequently, the average deal ticket size reduced from $32 million in CY21 to $23 million in CY22.

“Despite the funding slowdown, some areas like SaaS and early-stage funding have remained upbeat. With significant dry powder waiting to be invested, it seems likely that the funding scenario will begin to normalise after 2-3 quarters,” said Amit Nawka, Partner—Deals and India Startups Leader, PwC India. “Until then, however, many startups are using this time to tighten operating models and optimise their cash runway by deferring discretionary spends and investments.”

The top five sectors that attracted funding last year were software-as-a-service (SaaS), fintech, logistics and autotech, edtech, and direct-to-consumer (D2C), contributing approximately 71% to the total funding in CY22 in value terms.

SaaS was the most-funded sector of 2022 and grew by 20% in CY22 at $6 billion versus CY21 at $ 5 billion. It accounted for nearly 25% of the total funding in 2022.

Apart from SaaS, the media and entertainment sector also showed growth in funding activity during CY22. The steepest decline in funding during CY22 was witnessed in business-to-consumer (B2C) ecommerce at 71% and edtech at 54%.

Early-stage funding

Early-stage funding grew by 12% as compared to CY21, indicating that despite the global slowdown, investors are still positive about the Indian startup ecosystem.

Early-stage deals accounted for 60% and 62% of the total funding in CY21 and CY22, respectively, in volume terms. The average ticket size per deal was $4 million. In value terms, early-stage deals contributed to approximately 12% of the total funding in CY22 compared to nearly 7% in CY21.

Growth- and late-stage funding deals accounted for 88% of the funding activity in CY22 in terms of value. These represented 38% of the total count of deals. The average ticket size of growth-stage deals was $43 million and for late-stage deals, it was $94 million during CY22.

Early-stage startups recorded a total of 628 deals while growth-stage startups bagged 327 transactions and late-stage had 66.

City-wise trend

Bengaluru, Delhi-NCR, and Mumbai continue to be the key startup cities in India, representing around 88% of the total startup funding activity in 2022.

More than $100 million each was raised by 25 Bengaluru-based companies, including BYJU’S, Dailyhunt, Swiggy, Udaan, Table Space, ShareChat, Dunzo, and Ather Energy.

Delhi-NCR has 15 such companies including Delhivery, Stashfin, Moglix, Pine Labs, Lenskart, Oxyzo Financial Services, and HealthKart. Eight Mumbai-based companies raised more than $100 million each including Fractal, upGrad, Zepto, CoinDCX, Turtlemint, CleverTap, LEAD School, and FanCraze.

Bengaluru witnessed the highest number of unicorns, followed by NCR and Mumbai. Similar trends have been noted for other companies that have raised more than $50 million to $100 million.

M&A transactions

When it comes to M&A, there was a 17% decline during 2022 compared to CY21 in terms of deal volume. Around 246 M&A deals involving startups were executed in CY22. Of these, nearly 200 were domestic transactions and the rest were cross-border transactions. SaaS, ecommerce, D2C, and edtech startups attracted the highest number of M&A transactions—contributing nearly 60%.

Ecommerce and D2C sectors had the highest number of transactions at 61, followed by SaaS at 60.

Similar to venture capital funding, Mumbai, Bengaluru, and Delhi-NCR were the top cities for M&A transactions, followed by Pune. These four cities contributed to 70% of the M&A deals during CY22.