Hyderabad: The ongoing economic uncertainty and market volatility continue to affect the fundraising and investment activities in India. In fact, venture capital (VC) investment in Indian startups suffered a massive 38.2% decline YoY in value terms during 2022, finds GlobalData, a leading data and analytics company.
GlobalData’s Financial Deals Database analysis reveals a total of 1,726 VC funding deals worth $20.9 billion were announced in India in 2022 compared to 1,715 deals worth $33.8 billion in 2021.
“India is a key Asia-Pacific market and stands just next to China in terms of VC funding deal volume and value. It is also among the top four markets (the US, the UK, China and India) globally. India accounted for 5.1% and 6.3% share of global VC funding value and volume, respectively, in 2022,” said Aurojyoti Bose, Lead Analyst – GlobalData.
While the US, the UK and China registered a decline in VC investment deal volume in 2022 compared to the previous year, India stood out as a notable exception and registered 0.6% growth.
“Although India’s VC funding deal volume has slightly increased year-on-year, the significant drop in VC funding value seems to be a fallout of growing investor cautiousness over startup valuations,” commented Bose.
“Moreover, volatile market conditions and recession fears seem to have forced many investors to preserve capital. The restrictions on travel and in-person meetings also made it more difficult for VC firms to conduct due diligence on potential investments,” added Bose.
As a result, the average size of VC funding deals, which stood at $19.7 million in 2021 fell to $12.1 million in 2022. Meanwhile, the number of VC deals valued more than or equal to $100 million announced in India stood at 42 in 2022 as compared to 86 during the previous year.
“The decrease in VC investment can also be attributed to the lack of companies that can generate significant returns for investors. This is a common challenge for emerging economies, and India is no exception,” concluded Bose.