Startup funding rises slightly, but investors warn of volatility

After four months of declines, fund flows to startups rose slightly in September to $1.54 billion from $1.25 billion the previous month, according to data from Tracxn. Investors, however, said the marginal improvement should not be seen as a lasting trend.

Most of the flow of funds in September went to late-stage businesses, which had been hardest hit in the previous month. These companies raised about $871 million during the month compared to $621 million in August.

Start-ups and seed-stage companies, however, showed little improvement. Start-ups received about $552 million in September, while early-stage startups received just $77 million. While early-stage funding was higher than last month’s $478 million, so was seed-stage funding lower than last month’s $97 million.

In April, the month just before the downturn began, leading, early-stage, start-up and early-stage companies secured $4.21 billion, $1.1 billion and $185 million, respectively. .

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“September data does not establish that things will move in the positive direction here, as there will be more volatility going forward. We should watch the trend for another quarter, if the data continues to show improvement, we can say that the positive trend is sustainable,” said Ashish Kumar, co-founder and general partner of Fundamentum Partnership.

“There is, however, more willingness to accept capital at a more relevant valuation for all parts of the ecosystem. It’s been about five months since valuations were reset, down 20-30%, and people have realized that there is no point in lingering, the correction is no longer a short-term phenomenon, it is now at least a medium-term phenomenon, so founders and investors are more reconciled to this done,” he added.

September saw Molbio, a Goa-based diagnostics company, Yulu Bikes, the electric mobility-as-a-service provider, and Zopper, the insurance technology platform, mop up major fundraisers, pocketing $85 million. , $83 million and $75 million, respectively.

Another significant round was the $450 million investment by private equity firm KKR and Hero in Hero Futures Energies. DotPe, the Gurugram-based offline commerce platform, followed after raising $58 million. With the exception of Hero Future Energies, there was no $100 million round in September. There were about two such cycles in August and about seven in July.

“Venture capitalists are sitting on a lot of dry powder (the money they’ve raised from limited partners) that needs to be deployed. This is one of the reasons for the improved fund flow in September,” said Shashank Randev, co-founder of 100X.VC.

The number of transactions fell to 128 from 151 last month. Since the start of the current calendar year, there have been over 200 funding rounds each month until the end of May.