Start-up funding drops by almost 50%, hits lowest since 2014. Here's why

During Q1 FY17, number of deals reported was 165 as against 314 during the same period last year

The number of funding deals in the start-up space have dropped by 47.45 per cent during the first three months  (January to March) of 2017 as compared to the same period last year. In terms of value, the drop was around 36 per cent.

The decline in the number of deals is the lowest since 2014.

The decline reflects investor cautiousness in early and mid-stage funding, say experts.
 

The deal value of start-ups hit the lowest in 14 quarters, dropping below $300 million for the first time in nine quarters, according to News Corp VCCEdge's start-up deal rReport. 

During the first quarter of 2017, the number of deals reported was 165 as against 314 during the same period last year. In terms of value, it dropped to $237 million from $369 million.

Nita Kapoor, head of India New Ventures, News Corp and chief executive officer, News Corp VCCircle said, "Rise in Series-B funding, even as seed and Series-A funding trends show a decline, reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding".

He added, the relief, however, is that mergers and acquisitions (M&A) deals have picked up momentum post-2015 coinciding with the drop in funding activity in the start-up space, turning into an exit route for some promoters and a major source of funding for others. 

"Enterprises which can work on a combination of strong revenue models and continuously updated technological know-how which ensures a great consumer experience will continue to attract investors," Kapoor added. 

The drop was seen more in angel and seed funding. During the first quarter of 2017 total angel and seed deals reported was 120 as against 245, a drop of 51 per cent.

Series-A fund flow dropped to 24 from 44, while series-B funding dropped to 21 from 25.

With 40 deals mopping up around $96 million, 40 per cent of the total start-up deals of this quarter were in Bengaluru.

As far as the sectors are concerned, fin-tech displaced food-tech and travel-tech to grab the top spot of funding value. The total value of the money raised by start-ups in the fin-tech sector is estimated to be around $18.5 million during the first quarter as against $15 million during the same period last year. In terms of the number of deals — last year it was 19 while this year it was 11.