In October 2022, overall start-up funding showed an upward trend for the first time this year. But, funding for fintechs dropped to its lowest.
After nine months of declining, start-up financing in India recorded its first increase of the year in October. According to Tracxn statistics, Indian start-ups raised $1.08 billion in financing, up 39% from September 2022, but down 69% year on year.
The increase in October capital was led by late-stage acquisitions worth $846 million, a 265 percent increase over September. According to Tracxn, “this is mostly because to the two $100 million-plus rounds obtained by Udaan and Byju’s.”
Edtech decacorn Byju’s received $250 million in a Series F round from existing investors as it continues to suffer massive losses and layoffs, while B2B e-commerce unicorn Udaan raised $120 million from current shareholders as it prepares to go public in the next 12-18 months. This round occurred prior to Udaan’s November layoff of 350 employees.
Despite the improved pace in late-stage agreements, seed and early-stage investment fell by 17% and 63%, respectively, month on month. According to Tracxn, the top three financed industries in October were retail, edtech, and transportation and logistics.
Fintech, a normally hot industry among VCs, saw financing dip to a year low of $109 million, a loss of 48% month on month and a stunning 93% since October 2021.
Tracxn said, “The payments industry (the strongest performing in 2021) is one of the worst impacted in 2022. The segment’s overall funding has dropped by 53% year to date in 2022 compared to the same period last year. Another heavily impacted area is cryptocurrency. Until October 2022, funding has decreased by 48% compared to the same time last year.”
The sharp reduction in the value of crypto assets has resulted in a major drop in transaction volumes for exchanges worldwide, including on Indian platforms like as WazirX, CoinSwitch Kuber, and CoinDCX.
Tracxn noted, “Also, regulatory uncertainty has impacted investor confidence, resulting in a significant decline in financing in the industry.”
Overall, there was just one late-stage fundraising of $50 million in the fintech sector, which went to hybrid blockchain start-up XinFin. Meanwhile, alternative lending and investment technology were the most financed fintech categories.
According to the research, “Investment tech is the best performing market in the fintech industry, with a 30% rise in total financing until October 2022 as compared to the same time last year.”
Edtech has recently come under fire for being the worst-affected sector in terms of start-up layoffs. According to Tracxn data, 11 edtech start-ups, including industry leaders Byju’s, Unacademy, and Vedantu, have let off over 6,500 staff this year. Shifts in business models, widespread cost-cutting efforts, and entire shutdowns have also occurred in the industry.
Following the pandemic-driven surge in online education in 2021, edtech spending has likewise decreased in 2022. To date, the industry has raised $2.43 billion in total capital, a 38% decrease from $3.98 billion last year.