For 3rd consecutive quarter, startup funding in Q1 2022 exceeds $10 billion; Created 14 unicorns

The startup ecosystem spawned as many as 14 unicorns in the first three months of 2022, and for the third straight quarter they raised over $10 billion in 334 funding deals, according to an industry report.

The creation of 14 more unicorns brings the total number of startups valued at over $1 billion in the country to 84, according to a report by PwC India.

This marks the third consecutive quarter ending in March 2022, as fund inflows into the domestic startup ecosystem have generated over $10 billion in new funding. Up to 14 startups also became unicorns during the quarter, the report said. Total cash inflow for the first quarter was $10.8 billion.

According to the agency, software-as-a-service (SaaS) companies generated maximum funding during the quarter, grossing more than $3.5 billion.

The creation of unicorns continued to thrive with 14 startups achieving coveted status in the first quarter, with the SaaS sector accounting for the largest share and spawning five unicorns.

Amit Nawka, the consultancy’s startup lead, said PTI that despite the uncertainties in the global economic environment, domestic startups have continued to attract capital, particularly in the growth capital phase.

He went on to say that as startups mature, corporate governance conversations are becoming more mainstream, and it is becoming increasingly important for startups to design a corporate governance roadmap that aligns with the organization’s growth aspirations.

The volume of investment in the SaaS ecosystem has tripled over the past three years, he said, adding that the pandemic has only boosted this ecosystem globally, given the increasing importance of remote work, productivity and overall digital transformation.

Over the past year, 15 SaaS companies have joined the unicorn category in the country, including Darwinbox, Fractal, Uniphore, Hasura and Amagi Media Labs.

With Freshworks’ blockbuster listing on Nasdaq in late 2021, mature SaaS providers are increasingly considering a public listing, he said.

In the first quarter, around 80 M&A transactions were recorded in the start-up ecosystem, which were mainly driven by roll-up e-commerce companies. And Curefoods, Mensa Brands, GlobalBees, and MyGlamm, which have mergers and acquisitions as their core business strategy, continued to be the top acquirers in the first quarter, and Upscalio and Evenflow are other roll-up e-commerce companies joining the bandwagon to have.

E-commerce and direct-to-consumer accounted for a whopping 38% of first-quarter mergers and acquisitions, and SaaS accounted for 22% of deals.

Growth and late-stage startups accounted for 89% of first-quarter funding by value, accounting for 44% of total deal volume. Growth-stage funding has totaled $6.5 billion to $7 billion over the past three quarters with an average ticket size of $55 million to $70 million, while early-stage funding has approximately $761 million in inflows with an average size of $4 million, accounting for 55% of revenue volume, he said.