Third quarter funding in Indian startups largest this year

Ola Electric, Udaan, and Rebel Foods were a few high profile investments this quarter.

Photo by rupixen on Unsplash

Despite India’s slow growing economy, its technology companies in the the third quarter of fiscal 2019 raised record USD 2.55 billion capital from institutional investors, local media Mint reported Tuesday, citing startup data tracker Venture Intelligence.

This is the highest amount of funding Indian companies have garnered for any quarter this year, which is 25% more than what they raised in first and second quarter of this year.

Although the deal amount has increased, the number of deals have dropped in this quarter from 160 investments in Q1 to 117 in Q3. To put it simply, large tranches of money are being gobbled up by fewer startups. This year itself, at least eight startups gained the much coveted unicorn status—startups valued at USD 1 billion or more—suggesting startup growth is going against the grain in India’s slowing economy.

Arpan Sheth, partner at consultancy firm Bain & Co. believes slowdown hasn’t affected investors mind-set and that the fund-raising climate in India is bullish. “Despite slowdown concerns, venture capital investors are taking a seven-year view and expect consumption-led growth in that period. There have also been significant exits and liquidity created for investors, which brings even more capital back in.”

Compared to last year’s Q3 and Q4 investment that saw startups raise USD 3 billion in each quarter, this year’s third quarter investment is short by around USD 500,000. Third and fourth quarter of 2018 included a few big-ticket investment in food delivery company Swiggy, hotel rental major Oyo, and education technology company Byju’s among others.

The most high profile deals in Q3, 2019 include USD 414 million from Altimeter Capital, Hillhouse Capital and DST Global in B2B trade platform Udaan; Ola Electric, the electric vehicle arm of cab aggregator Ola, which raised USD 250 million led by SoftBank Group, and USD 130 million from hedge fund Coatue Management infused into Rebel Foods, owner of India’s biggest cloud-kitchen company.

A global trend in startup funding which is also gaining strength in India is that pension funds and sovereign wealth funds are driving investment in late-stage tech companies compared to VCs. According to technology media Inc42 nearly 49,000 startups have come into existence in India between the years 2008 and 2018, and have collectively raised more than USD 51 billion in funds.