Startup funding is shrinking: Indian crypto are the worst hit
Due to ongoing geopolitical unrest in the world, VCs have started withdrawing their money from startups, this has led to a huge cash crunch in the Indian startup sector. Many have started shedding employees to cut down their operational costs.
As per recent PwC India report, investment fell as low as 40% to $6.8 billion between April-June, 2022. The dollar appreciation vs Indian rupee and rising Indian interest rates are further responsible,” Raj A Kapoor, founder of India Blockchain Alliance, a think-tank, told FE Digital Currency.
Although this year 17 startups have become unicorns with almost half of the year still left. The startup ecosystem was looking good at the beginning of the year, corona cases were diminishing, and countries were opening their borders but a sudden war between Ukraine and Russia upset the whole world. Only 4 startups were able to raise money and become a unicorn in Q2CY22. Mirroring a global trend in decline in the number of new unicorns this last quarter. “The ecosystem will require a good 12-15 months to recalibrate from the present scenario. The various macro-economic indices present a veritable slow haul and a long ‘crypto winter’,” Kapoor stated.
Industry specialists expect that valuation would become more reasonable and a ton of wheat will be separated from the chaff. In future, there will be a deficiency of enormous strategic and secondary transactions. Moreover, it is anticipated that IPO exits will be delayed or postponed and valuations will decline.
The case of Paytm is fresh in the mind of the investors. The issue price of Paytm was ₹2150 on November 8, 2021, while today it trades for a mere ₹697. The drastic loss of value is looking like a red flag for VCs.
There are about 1200 unicorns in the world. India has around 108. Most of them operate in the SaaS sector, followed by Fintech. In Mumbai, the report said, more than $100 million was raised by four companies each, including upGrad, Zepto, CoinDCX and Turtlemint. “Due to current federal policy, market liquidity has significantly decreased which has caused a temporary suspension in funding,” Gaurav Mehta, founder, Catax- Simple Crypto Taxes, an online crypto tax solution, said.
With a growing economy at a pace of 6.9% in FY 2022-2023 and by 6.2% in FY 2023–24, according to the most recent OECD report. The investors are bound to come back once things start getting normal on the global stage. Right now survival is a big issue for a lot of firms due to the cash crunch.
It is believed that a few firms have the monetary assets enough to suffer the widespread market. In NCR seven organisations — Robotics, Absolute Foods, Delhivery, Stashfin, Rario, Gray Orange Fashinza and PhysicsWallah — raised more than $100 million, each.
