Funding for startups is showing no signs of slowing down, instead even getting a dash of glamour from Bollywood stars to boot.
According to Indian Tech Startup Funding’s latest report, funding in the first quarter of 2019 (January-March) saw a phenomenal 39 per cent increase at $3.42 per cent from $2.46 billion during the same period a year ago. However, sequential growth stood at a pedestrian 5 per cent. Nevertheless, it’s a strong indicator for the ecosystem, as total funding had been declining since Q2 2017.
2019 also saw a bevy of Bollywood stars including Deepika Padukone, Suniel Shetty, and Arjun Kapoor backing startups, while experts anticipate more actors to follow suit in the coming quarters.
As for sectors, e-commerce once again took the pole position, emerging as the highest funded sector for five consecutive years.
Among investors, Sequoia Capital stood out as the most active venture capitalist during the first quarter, having participated in 12 funding deals, followed by Blume Ventures and Matrix Partners with 8 deals each. Other players like Accel Partners India saw enthusiastic participation with 6 deals, according to Ankan Das, Head, DataLabs, Inc42.
While seed stage funding deals during the first quarter grew by 13 per cent compared to the previous quarter — a relief, since deals in this stage have fallen significantly since 2018. However, despite the rise in the number of deals, the average funding amount continued to fall for the second consecutive quarter, declining by 5 per cent in Q1 2019 compared to Q4 2018.
As for bridge funding, the first quarter of each year usually sees a higher volume of bridge funding deals compared to other quarters. This could be attributed to startups wanting to extend their runway in the last quarter of the financial year. In Q1 2019, the amount grew significantly, recording a growth of 184 per cent, according to Das.
Similarly, growth stage funding registered an increase of 69 per cent as against the previous quarter. While the amount of funding has been increasing, the number of deals in this stage has been falling since Q3 2018. In Q1 2019 too, the number of deals fell by 10 per cent compared to the previous quarter. Finally, late stage funding which has been on a decline since Q3, 2018 continued its downward trajectory with a 17 per cent dip compared to the previous quarter. However, late stage funding in Q1 has historically been low compared to rest of the year.
Meanwhile, the Centre has proposed setting up ‘India Startup Fund’ with a corpus of Rs 1,000 crore to support high technology startups. It also proposed a corpus of Rs 1,000 crore as part of incentives under the vision document ‘Startup India Vision 2024’, which was prepared by the Department for Promotion of Industry and Internal Trade. It aims to set up 50,000 new startups and create 20 lakh direct and indirect jobs by 2024.