Are We Moving From Funding Winter to a Funding Spring? In the last week, we have seen many startups such as Ola Electric and Builder.ai raise huge rounds of funding
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It may not be yet the time to celebrate, but there seems to be a ray of hope. In the last week, we have seen many Series A, B funding rounds happening.
Here is a snapshot of some of the prominent ones:
- Ola Electric raised $300 Million in funding at a $6 billion valuation
- Builder.ai, an AI-powered composable software platform, raised $250 million in Series D funding.
- Online learning platform, uFaber raised INR 25 crore in a Series A funding round led by Mastermind JPIN Capital Partners and Gray Matters Capital
- Hopscotch, a brand for kids' fashion, has announced that its parent company, Hit the Mark, Inc., raised $20 million in a funding round led by Amazon. The round also saw participation from Eduardo Saverin, co-founder of Facebook and some other existing investors.
- Pune-based Walko Food's NIC, an ice cream brand and a quick-service restaurant company, raised $11 million in a growth funding round led by Jungle Ventures.
In addition to these, according to news reports, Japanese investor SoftBank is open to funding companies that could turn into unicorns. It is reportedly in talks with five Indian startups. This also signals towards a positive funding scenario going forward.
The Tokyo-based investment bank is looking to invest $50-100 million in startups with valuations of around $400 to $500 million. According to a Business Standard report, it will be looking at startups from the B2C space, enterprise, and media.
"Investors know that we are past the bottom of startup funding. Hence, it's a good time to enter into startups, especially in the early stages, which will form the bedrock for the next wave of unicorns in the coming decade. Early-stage funding has been on the path to resurgence, as we see that a lot of deals have happened in the past 6–8 weeks. Meanwhile, late-stage rounds have also started to pick up recently," said Kavit Sutariya, general partner, Capfort Ventures, in an interview last month. Since then, the situation only seems to have improved.
According to our sources, many investors are conducting back-to-back calls with entrepreneurs and hearing out many pitches. Most firms are also keen on closing rounds in the coming month. Notably, Matrix Partners recently said in its filing that it has raised $518 Mn for its fund and is aiming to raise another $7 Mn, bringing the total to $525 Mn. The firm's portfolio companies include Razorpay, OfBusiness and Ola. The firm closed its third fund at $300 Mn around four years ago.
Info Edge executive vice-chairman Sanjeev Bikhchandani also said that the current environment is 'actually a good time to invest' in startups. "Look, it's hard to predict, but in general, we are noting that there is still enough activity on the startups and the funds side. It's actually a good time to invest," said Bikhchandani at the company's earnings call for the quarter and the year ended March 2023.
End of funding winter soon?
While these are positive signs, it's too early to predict that things will go back to how it was anytime soon, given the macroeconomic conditions.
"Early stage will continue to see a positive trend as valuations have turned more realistic and funds can take more bets at lower risk than in 2021. In the growth stage, I am of the opinion that we will see more M&As or consolidation before we see the new entities getting funded again," said Anup Jain, managing partner, Orios.
2021 was a great year for Indian startups. But, investments reached an all-time low in the first two quarters of fiscal year 2022. According to data shared by Tracxn, Indian startups raised only $752 million in September 2022, down 83 per cent as compared to the year-ago period. However, ecosystem stakeholders stay optimistic. And, recent funding rounds definitely hint towards better days in the coming months.
"Funding winter is almost over. Soon, we will have funding summer. Maybe funding winter after that. But, things will improve in the coming months," said Aman Gupta, co-founder, boAt, at the recently-concluded Irec Summit 2023.
Note: Sanjeev Bikhchandani's quote was added a day after the story was published