普華永道：2022年第三季度印度初創(chuàng)企業(yè)交易報(bào)告

Start-upPerspectives

Indiastart-updealstrackerQ3CY22

2

PwC|Start-upPerspectives

Executive

summary

01

Dearreaders,

FundingwintercontinuesinIndia’sstart-upecosystemaswellasglobally,andit’suncertainuntilwhenthiswilllast.Start-upfundinginIndiaduringQ3CY22hitatwo-yearlowatUSD2.7billionacross205deals.Althoughithasbeenarguedthatthereissubstantialcommittedcapitalwaitingtobedeployed(drypowder)intheIndianstart-upecosystem,itisbecomingclearerthatselectivityindealmakingwillincrease,withafocusonpath-to-profitability,especiallyingrowth-tolate-stagecompanies.ThiseditionofthenewslettersummarisesourdiscussionswithseveralleadinginvestorsintheIndianstart-upecosystemonthecurrentfundingenvironmentandoutlook.

Whiledeclineinfundingisnotedacrossallstagesofinvestment–early,growthandlate–wenotethatthedeclinehasbeentheleastinearly-stagedeals,wheretheaverageticketsizeisbetweenUSD4–5million.Thisindicatesthatventurecapital(VC)firmscontinuetobacktheIndianstart-upecosystem.Fundingingrowth-andlate-stagedealscontinuedtodecline,withanaverageticketsizeofUSD13millioninQ3CY22.TheFinTechandSaaSsectorscontinuedtoattractthemostcapitalinQ3CY22,inlinewithpreviousquartertrends.

Inthisedition,wehaveincludedananalysisofglobaldrypowderintheventurecapitalecosystem–ametricoftendiscussedinstart-upinvestingcirclesthesedays.Wefindthatasignificantaccumulationofthisdrypowderhashappenedfromcapitalcommittedin2021and2022.TheGovernmentofIndiahasalsolaunchedvariousseedfundschemes,creditguaranteeschemesandmentorshipprogrammestosupporttheIndianstart-upecosystem.Further,wehaveprovidedourviewsonhowstart-upscanintegrateenvironmental,socialandgovernance(ESG)intotheirbusinessearlyandcreatevalueintheshortandlongterm.ESGisgainingprominencewitharound4,500institutionalfundscommittingtotheUNPrinciplesforResponsibleInvestment(PRI).

Ihopeyoufindthiseditiontobeagoodandinsightfulread.

Regards,

AmitNawka

Start-upsLeaderandPartner,Deals

PwCIndia

~USD2.7billionraisedby

Indianstart-upsinQ3CY22

205successfulVC/private

equity(PE)dealsclosedin

Q3CY22

AverageticketsizeperdealinQ3CY22was

USD13million

Growth-andlate-stagedealscomprise

around79%ofthetotalfunding

FinTech,SaaSandEdTecharethe

topinvestedsectorsinQ3CY22

Twostart-upsattainedunicornstatus

inQ3CY22andthetotalcountofactive

unicornsis84

3

PwC|Start-upPerspectives

FundingAmount(inUSDbillion)

Dealcount(numbers)

Fundingamount(inUSDbillion)

Q1CY19

Q2CY19

Q3CY19

Q4CY19

Q1CY20

Q2CY20

Q3CY20

Q4CY20

Q1CY21

Q2CY21

Q3CY21

Q4CY21

Q1CY22

Q2CY22

Q3CY22

8,000

347

326

7,000

6,000

5,000

4,000

3,000

2,000

1,000

350

300

250

200

150

100

50

10

8

6

4

2

205

-

-

-

02

SignificantdeclineinvalueoffundingactivityduringQ3CY22(USD2.7billion)comparedtoQ2CY22(USD6.6billion)andQ3CY21(11.4billion)

Fundinganddealcount

Topfive*sectors(fundingtrends)

400

283

210213210213

161174184

4.03.05.67.811.410.4

201200

285

214

12

Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3

CY19CY19CY19CY19CY20CY20CY20CY20CY21CY21CY21CY21CY22CY22CY22

Fundingamount($Bn)DealcountFintechSaaSLogiandAutoTechMediaandentertainmentEdTech

Source:VentureIntelligence

?DeclineinfundingactivitynotedinQ3CY22(USD2.7billion)comparedtoQ2CY22(USD6.6billion).Thedeclinewasbothintermsofvalue(59%)aswellasvolume(28%).

?BarringEdTechande-commerceB2B,fundingactivitydeclinedacrossallsectorsduringQ3CY22.

?TheaveragedealticketsizedeclinedfromUSD23millioninQ2CY22toUSD13millioninQ3CY22.

Source:VentureIntelligence

*BasedonfundinginallthreequartersofCY22

?Thetopfive*sectorscontributedapproximately67%offundingactivity–FinTech,LogiandAutoTech,SaaS,Mediaandentertainment,andEdTech.

?ThekeydealsacrosstheseweresectorsduringQ3CY22were(a)FinTech–OneCard,EarlySalary,Fi.MoneyandJaiKisan;(b)LogiandAutoTech–YuluBikes,ShiprocketandXpressBees(c)SaaS–CleverTap,Skyroot,PriceLabs;(d)Mediaandentertainment–KuKuFMand(e)EdTech–UpGrad,Sunstone.

4

PwC|Start-upPerspectives

Indiaremainsatopstart-uphubwhichofferstoptechtalent,ahugeconsumerbase,aneconomywithstrongfundamentalsandstablegeopolitics.Thus,newfundsandcapitalwillkeepflowingintoIndiaandthat’sonlyboundtoincrease.Willitbedemocraticallydistributed?Unfortunately,not.Wewillseeaneraof‘consolidation’thatfollows.Thecompaniesthatexecutetheirvisionefficientlywillgarnermarketshare,revenue,profitsandcashflows.Whenconsolidationplaysout,suchcompanieswillattractmoreinvestmentsandbecomemorevaluable.

WhileitisgreattoseesuchcapitalflowingintoIndia,foundersmustrememberthatfundraisingisjustamilestone,andnotanaccomplishment.Itisnotamoat,butameanstobuyresourcessuchasskilledmanpower,technologyandtime.Itdoesnotguaranteegreatexecution,whichisthesecretsauceforthesuccessofstart-ups.

Basedontheirexecution,companiesthatcreatestrategicmoatsbylearningfast,pivotingifnecessary,andcreatingmultiplerevenuestreamswillacethe3CframeworkwithadistinctivecheckonCashflow,CommunicationandCulture.Prudentinvestorswillkeepaneyeonsuchcompaniesandwillinvestandflourishalongwiththem.

Sincestartof2022,wehaveseenthatthemarkethasalreadystarteddistinguishingcompaniesthathavetoiledfromtheonesthatgotlucky.Marketshaveseparatedtheprocess-drivenunicornsfromtherest.Itisallaboutthebalanceyouneedwhilewalkingthetightropeofentrepreneurship,andthisisexactlywhereinvestorsaredistinguishingthebestfunambulistsfromtheonesthatmayfalloff.Founderswhoarefocusedoncreatingrobustprocessesandacultureofgrowthanddevelopment,willensurethatthelearningcurveacrosstheirorganisationisbetter.Theywillmanageupturnsanddowncyclesefficiently.

AshishDave,CEOofMiraeAssetVentureInvestments(India)

5

PwC|Start-upPerspectives

‘

Fundingvalue(inUSDmillion)

Q2CY22Q3CY22

Dealcount

(numbers)

Q2CY22Q3CY22

57

36

55

10

23

14

17

9

7

2

5

3

24

FinTech

SaaS

EdTech

D2C

LogiandAutoTech

HealthTech

E-commerceB2B

E-commerceB2C

Mediaandentertainment

RealestateTech

FoodTech

Onlinegaming

Others

Source:VentureIntelligence

797

469

305

259

208

270

70

26

21

18

7

1,585

1,600

235

352

759

150

64

425

1,046

33

115

170

85

13

36

15

10

7

12

14

6

3

4

102

23

250

Declineinfundingactivity,bothintermsofdealvalueanddealcount,acrossallsectorsbarringEdTechandE-commerceB2B

03

Fundinginsightsintokeysectors

?TheFinTechsectorcontributedto30%ofthetotalfundingduringQ3CY22.Therehasbeenadeclineby60%inthefundsraisedforFinTechstart-upsinQ3CY22comparedtothepreviousquarter.FivecompaniesraisedoverUSD50millioninQ3CY22–OneCard,EarlySalary,Servify,Fi.moneyandJaikisan.OneCardattainedunicornstatusinQ3CY22.Wenotethatintermsofdealcount,around50%ofthetotaldealsinthissegmentaregrowth-/late-stagecompanies,indicatingincreasingmaturityinthissegment.Further,wealsonotethattheaverageticketsizeofinvestmentsinearly-stagecompanieswasUSD5.6million(basedonthelastsevenquarters),whichisamongthehighestacrossallsegments.

?SaaS:DeclinenotedbothinvalueaswellasvolumetermsinQ3CY22comparedtoQ2CY22.WhilesixcompaniesraisedmorethanUSD100millioneachinQ2CY22,onlyCleverTapraisedUSD100million+inQ3CY22.Morethan75%ofthedeals(intermsofdealcount)inthisspaceweredrivenbyearly-stagefundingrounds,withalowticketsizeofUSD4millioneachinQ3CY22.

?EdTech:FundinginthissegmenthasshownapositivetrendinQ3CY22comparedtothepreviousquarter(invalueterms).InQ3CY22,81%offundingactivitywascontributedbyUpGrad,whichraisedUSD225million,followedbySunstone,whichraisedUSD35million.

?D2C:Declinenotedinfundingactivitybothinvalue(~36%decline)aswellasvolumeterms(~50%decline).OutofthetotalfundingworthUSD226millionraised,approximately73%wasdrivenbyLenskart,whichraisedUSD166million.Intermsofdealcount,16outof19dealsinQ3CY22weredrivenbyearly-stagecompanies.Theaverageticketsizeofinvestmentsinearly-stagecompanieswasUSD3.3million(basedonthelastsevenquarters).

?LogiandAutoTech:YuluBikesandShiprocketweretheonlytwocompaniesthatraisedmorethanUSD30millioneachinQ3CY22.ShiprocketattainedunicornstatusinQ3CY22.

?HealthTech:WhiledealcountincreasedintheHealthTechspace,totalfundsraisedshowedadecliningtrend.Small-ticketdealstookplaceinQ3CY22,thoughMedGenomeraisedUSD50million.

?E-commerceB2B:Minorincreaseinfundingactivitynotedinthissector.VeGrowandBizongoraisedmorethanUSD20millioneachinQ3CY22.

?Mediaandentertainment:DailyhuntraisedoverUSD800millioninQ2CY22andhencethefundingvaluewassignificantlyhigh.OnlyonedealtookplaceinQ3CY22inthissector(KuKuFM).

6

PwC|Start-upPerspectives

5621,682454

8104,184

1,641

3,326

2,028722

143

52

175

97

Q1CY22

197

127

163

99

Growth-stagedealsrepresented62%ofthetotalfundingvalueinQ3CY22

(USD1.7billion)–averageticketsizeperdealhasdeclinedinthelastfour

quarters

.Growth-andlate-stagefundingdealsaccountedfor79%ofthefundingactivityinQ3CY22(valueterms).Theserepresented30%ofthetotaldealactivity(countterms).Averageticketsizeingrowth-stage

dealscontinuedtodeclineandwasUSD32millionduringQ3CY22.Theaverageticketsizeoflate-stagedealsdeclinedsignificantlyinQ3CY22–thiswasonaccountofminimalfunds/low-ticketsizeraised

byestablishedstart-upssuchasInnoviti,XpressBeesandPriceLabs.

04

.Early-stagedealsaccountedfor70%oftotalfundinginQ3CY22comparedtotheir60%shareinQ2CY22(involumeterms).AverageticketsizeperdealrangedfromUSD4–5millionperdeal.Invalue

terms,earlystagedealscontributedaround21%ofthetotalfundinginQ3CY22comparedtoaround12%inQ2CY22.

Fundingtrends(USDmillion)

Q3CY22

Q2CY22

Q1CY22

8767,008

610

7,051

Q4CY21

4,0006,0008,00010,000

2,000

-

12,000

Fundingamount(inUSDmillion)

Early

GrowthLatePre-IPO

Numberofdeals(count)

10

Q3CY22

13

Q2CY22

23

17

4

Q4CY21

-50100150200250300350

Dealcount(numbers)

EarlyGrowthLatePre-IPO

Averageticketsizeperdeal

160

145

400

Funding(InUSDmillionperdeal)

140

120

100

80

60

40

20

-

126

119

71

55

45

43

37

32

32

23

13

4454

EarlyGrowthLateOverall

Q4CY21Q1CY22Q2CY22Q3CY22

Source:VentureIntelligence

Source:VentureIntelligence

Source:VentureIntelligence

7

PwC|Start-upPerspectives

Afterayearofstep-functiongrowth,Indiaisnowthethird-largeststart-upecosystemglobally.Thepost-COVIDemergenceofIndia’sstart-upeconomycatalysedaseriesofinflectionmomentsacrosssectors,leadingto40+unicornsbeingaddedjustin2021.Itwas,ofcourse,ayearthatsawrecordallocationstotechandPEglobally,whichmeantthatprivatelyheldtechstart-upsenjoyedanextraordinaryyearofavailablecapitalchasingthebestgrowthstories.However,industryobserverswillalsoagreethatIndia’sinternettotaladdressablemarket(TAM)correspondinglysawrapidandwelcomeexpansion.

Asaresultofthepiegrowingdemonstrably,themarketleadersineverysegmentwerealsovaluedmoreappropriatelyatunicornlevels.Ahyperactiveyearofexits,M&A,andIPOsfurthersustainedthethesisthatIndiacannowsupportlarge-scalereturnsasprivatecompaniesreachmainstreamsize.WithoverUSD17.4billionreturnedbytechexitsandUSD7.3billionraisedbytechIPOsthisyear,globalallocatorsarenowencouragedtoassignmorecapitaltobereinvestedinthenextcycleoftechbeingbuiltoutfromIndia.

Ofcourse,asglobalmarketscorrectafteraseriesofmacroandgeopoliticaleventsoverH12022,Indianstart-upshaveneededtoprepareforanewseasonofselectivityfrominvestors.Nowisthetimetointrospect,buildtheconnectivetissuetoaligntheirleadershipandorganisations,andfocustheiraggressiononbecomingnotjustthemostvaluablebutalsothebest-runcompaniesintheirsectors.Thecombinationofhighgovernanceandafocusedpathtowardssustainabilitymustserveasthefundamentalsubstratefortheecosystemthisdecade.Additionally,iftheearlysignalsofrecessionindevelopedmarketsdostrengthen,thispreparationwillservetheecosystemwellasaresponse.

WeexpectmorecapitaltobeavailablefromJanuary2023.However,itisalmostcertainthatselectivityindealmakingwillincrease,andstart-upswillhavetoproveapathtosustainablegrowth.IPOswillalsoresumefrom2023,andpricingisexpectedtobefarmoremoderateaswell.ThedemandforIndianmarketleadersandcategorycreatorswillcontinueoverthemediumandlongtermasmarketsrecoverfromthesecorrectionsnextyear.

PranavPai,FoundingPartnerandCIOat3one4Capital

8

PwC|Start-upPerspectives

FundingAmount(inUSDmillion)

3,343

841

1,132

703

1,878

648

69

265

58

87

86

45

69

111

Dealcount(numbers)

3,500

3,000

2,500

2,000

1,500

1,000

500

79

48

46

44

17

11

89

97

9

8

City-wisetrends–Bengaluru,MumbaiandNCRcontinuetobethekeystart-upcitiesinIndia,representingaround81%ofthetotalventurecapital

(VC)/privateequity(PE)fundingactivityinQ3CY22

05

Citywise

4,000

trends–funding

Citywisetrends–dealcount

120

100

80

60

40

20

113

82

-

-

BangaloreMumbaiNCRPuneHyderabadChennaiOthers

BangaloreMumbaiNCRPuneHyderabadChennaiOthers

Q2CY22Q3CY22

Source:VentureIntelligence

Q2CY22Q3CY22

Source:VentureIntelligence

Bengaluru,MumbaiandNCRcontinuetobethekeystart-upcitiesinIndia,togethercontributingaround81%ofthetotalfundingactivityinQ3CY22,followedbyPuneandHyderabad.

Mumbai:

MorethanUSD30millionwasraisedbyfourcompanieseachin

Q3CY22.TheseincludeupGrad,CleverTap,ServifyandJaiKisan.

InnovitiandNiYo.

NCR:

Sixcompanies–Lenskart,Zopper,DotPE,Tata1mg,Sunstone

Bengaluru:

MorethanUSD30millionwasraisedbysixcompanieseachin

andShiprocket–raisedmorethanUSD30millioneachinQ3

CY22.

Q3CY22–AccionLabs,YuluBikes,Fi.Money,MedGenome,

PwC|Start-upPerspectives9

38M&Adealsinvolvingstart-upswereexecutedinQ3CY22

.Thisquartersaw30domestic,fiveinboundandthreeoutbounddeals.SaaSandEdTechwitnessedthehighestnumberofM&AtransactionsduringQ3CY22–nineinSaaSandseveninEdTech..EdtechcompanyupGradhasbeenthetopacquirerthisquarterwithfouracquisitions–WolvesIndia,HarappaEducation,ExampurandCentumLearning.

.ThelargestdealswasexecutedintheHealthTechspace–TorrentPharmaceutical’sacquisitionofCuratioHealthforUSD263million.

06

M&Adealcount

120

100

80

60

40

20

0

100

54

38

101

82

Q3CY21Q4CY21Q1CY22Q2CY22Q3CY22

Source:VentureIntelligence

SectorsplitofdealcountinQ3CY22

SaaS24%

Others*

26%

EdTech18%

RealEstateTech

3%

E-Commerceand

HealthTech

11%

D2C

5%

FinTech

13%

*IncludingLogiandAutoTech,FoodTech,mediaand

entertainmentandonlinegaming

Source:VentureIntelligence

FewnotableacquisitionsinQ3CY22bydealvalue

Acquirer

upGrad

TorrentPharmaceutical

Onsitego

Unacademy

Nykaa

RelianceIndustries

Target

CentumLearning

CuratioHealthcare

Digi2L

GateAcademy

LittleBlackBox

SenseHawk

Sector

EdTech

HealthTech

E-commerceB2C

EdTech

Mediaand

entertainment

SaaS

Source:VentureIntelligence

10

PwC|Start-upPerspectives

FoodTech

Source:VentureIntelligence

Note:

Severalreportspegthetotalcountofunicornsat105asof30September2022.Inthetablealongside,wereconcilethis

numberwiththecountof84consideredinthetableabove.

Twostart-upsattainedunicornstatusinQ3CY22–ShiprocketandOneCard

UnicorncountBeforeCY18CY18CY19CY20CY21Q1CY22Q2CY22Q3CY22AsofSep2022

FinTech---3921116

SaaS

07

20

2

2

2

8

5

1

-

-

E-commerceB2C---141--6

LogiTechandAutoTech1-2-12-17

EdTech-1-1311-7

D2C

-

-

1

-

6

-

1

-

7

E-commerceB2B-1--4---5

Mediaandentertainment1--211--5

HealthTech----3---3

RealestateTech-1--11--3

Onlinegaming--1-11--3

-

1

-

-

1

-

-

-

2

Total346942144284

Totalnumberofunicornsasof30September2022105

Acquired(

4)

Listed(

10)

Fallinvaluation(

5)

Start-upsnotreportedtohaveraisedexternalinstitutionalfundingbeforereachingunicornstatus(

2)

Activeunicornsasof30September202284

11

PwC|Start-upPerspectives

Early-stagewinterisover–unofficially,

anecdotallybutglobally!Letthegamesbegin–

hopefullysanerthiscyclebutnotholdingmy

breathgivenalltheVCdrypowder!

Potentialfounderswatchingfromthesidelines–

timetogetonthefieldandplay!

Late-stagemighttakemoretime–bidask

spreadstilltoowide,companiesarewell

capitalisedandexecutingtolikelyconvergence

atsomepointin2023!

AvnishBajaj,Founderand

ManagingPartneratMatrixPartners

PwC|Start-upPerspectives12

125

88

intheemergenceofonly20unicornsgloballyinQ3CY22,a

Q3CY21

Q4CY21

Q1CY22

Q2CY22

Q3CY22

20

136

139

significantdeclineascomparedtopreviousquarters.

.55%ofthenewunicornsthisquarterarefromtheUS(11).India,

SouthKoreaandtheUKeachaddedtwo.

.SaaShasdominatedthisquarter,witharound45%ofthenew

unicornsemergingfromthesector.

.Nonewdecacornswereaddedthisquarter.Therewasa

significantdropinthevaluationofsomedecacorns,withcompanies

nothavingenoughcashbeingforcedtoraisefundsata

significantdiscount.

0

50

100

150

Globally,Q3CY22producedonly20newunicorns,mirroringaglobalslowdowninventurefunding–45%ofthesearefromtheSaaSspace

08

Numberofunicornsaddedduringthelastfivequarters

SectoraldistributionofunicornsinQ3CY22

.Unstablemacroconditionsandtighteningofventurefundingresulted

D2C5%

EdTech

5%

Logistics

10%

SaaS(including

HealthTech

15%

FinTech

20%

AI)

45%

Source:CBInsights(13Sep2022)

Source:CBInsights(13Sep2022)

13

PwC|Start-upPerspectives

112

126

137

133

137

247

335

150

154

161

177

399

448

507

538

540

562

Cumulativedrypowderbyyear(inUSDbillion)

600

Drypowderbyvintage

Cumulativedrypowder

500

Globally,USD562billionofdrypowderisavailablewithventurecapitalfirms.Whenwillthefloodgatesopen?

09

?ForVCandPEfirms,drypowderreferstotheamountofcommittedbutunallocatedcapitalafirmhasonhand.Itisanunspentcashreservethatiswaitingtobeinvested.

?ThebuildupofdrypowderisduetoamarketpullbackbyVCfundsthatarebeingpickyabouttheir

investments.Thefocusisoncompaniesthathavestronguniteconomicsandapathtoprofitability.

?ThereisaroundUSD562billionindrypowderavailableforstart-upsinVCfunds,anindicatorthat

wecouldseestronginvestmentcyclesahead.

?Globally,thetotalassetsundermanagementasat30June2022isUSD2,700billion.

400

300

200

100

0

200620082010201220142016201820202022*

Source:PitchbookData,Inc.(asat30Jun2022)

14

PwC|Start-upPerspectives

TheVCindustryhasadistinctadvantageinreceivinghighcreditforitslinkagetotechnologicaldisruption.Thepromiseofanew,fundamentally

moredigitalworldandadesiretoparticipateinthevaluecreationhasledtohighercapitalallocationtoVC.Thisexpectationwasfuelledbythe

12-yearbullmarketcycleandthemassivedigitaladoptionthatoccurredduringCOVID.Aftermanywarningshots,bythesecondquarterof

2022,thepartyseemstobefinallyover.

Start-upswithbusinessmodelsrequiringhighburnanddelayedmonetisation,suchasthoseinB2Cmarkets,havethegreatestexposureto

fundingrisk.Firmswithlowburn,suchasSaaSstart-ups,haveseenlessimpact.Rationalisationexercisestowardscashconservation

undertakenbycash-richcompanieshavesouredmanyacquisitiontransactions.Lackofacquisitionactivityduetovaluationmismatchis

expectedtoaddtomortalityofcash-starvedstart-ups.

Thereishoweverasilverlining.Indiaisrichwithhigh-potentialsectorsthatcanbedisrupted,suchasFinTech,agri,HealthTech,consumer

internetandSaaS.Globalcapitalallocatorsmustchoosemarketstodeploy,andIndiahasemergedasatopchoicegivenitssheersize,quality

ofentrepreneurshipandmorerecentsignsofapublicmarketthatallowsforforeigncapitaltobereturnedtoorigin.Thirdly,cap-tablesarein

goodshapesimplybecausethelastfewroundsweredoneathighvaluations.So,thereisplentyofroomtodilutewhilemanagingfounder

ownership.Andlastly,thereisplentyofdrypowder.IndiaVCcanbeatathrivinglevelevenatUSD10billionofcapitalinvestedperyear.2021

wasUSD38billion,andthereisp