India's share in venture capital funding falls sharply; China surges ahead

India saw a decline in its share of total venture capital funding that went to Asia in Q3 calendar year (CY) 2022, compared to the previous quarter. On the other hand, China gained market share despite the internal crackdown on tech companies and apprehensions of PE funds.

Based on data analysis by CB Insights, India's share of venture capital funding in Q3 CY2022 fell by nearly half to 14 per cent (of total VC investment of $20.1 billion) compared to 22 per cent in Q2 (of total VC investment of $29.8 billion). Yet during the same period, China's share of total venture capital funding in Asia went up from 34 per cent in Q2 CY2022 to 42 per cent in Q3 CY2022, even though overall VC funding shrank in Asia.

At the global level, India's share of VC funding has fallen from 5.8 per cent (of global VC funding of $112.68 billion) in Q2 CY2022 to 3.75 per cent in Q3 CY2022 (of total global VC funding of $74.5 billion). During the same period, China saw its share go up from 9.05 per cent in Q2 CY2022 to 11.4 per cent in Q3 CY2022.         

While global VC funding has fallen 34 per cent quarter on quarter and that of the Asian market by 33 per cent, Indian venture capital funding has fallen far more steeply. China saw a slower decline.

VC funding in India in Q3 CY2022 fell to a ten-quarter low to just $2.8 billion for 387 deals. This was a 58 per cent decline over the previous quarter ($6.6 billion for 404 deals). This is the lowest level since Q2 CY2020, when the Covid-19 pandemic hit the global economy. The pandemic was an indication of the tightening of the availability of private funds. The trend hit investments across segments- early stage, which accounts for over 70 per cent of the deals; mid-stage and late stages of investments.

The decline in Q3 CY2022 is even sharper on a year-on-year basis, as venture funding in this quarter is less than one-third of Q3 CY2021 when it hit $9.8 billion.

The decline was lower in China, where Q3 saw a 26 per cent decline in venture funding over Q2 CY2022. This decline was lower than India, Asia or even the global average.

This contrast between India and China is also observed in the size of the deals. In Q3, India's largest deal involved upGrad, which raised $210 million, followed by Lenskart, raising $200 million. In China, the largest deal was done by Sesame Technologies, which raised $500 million, while the smallest deal was for $200 million.