According to a report released on Wednesday, India surpassed China in 2022 by adding 23 unicorns, whereas the neighbouring nation had 11 such startups with a valuation of USD 1 billion or more.
According to a report by IVCA-Bain & Co, India outpaced China in 2022 by creating 23 unicorns, bringing the total number of such high-value companies to 96 as opposed to China’s 11.
However, the quantity produced this year is just half that of 2021, when a record 44 unicorns were produced, bringing the total to 73. Nine of the 23 unicorns that have been added this year, per the report, have come from places other than the top three metro areas, pointing to a shift towards more geographically democratic funding. This indicates that funding for startups in non-metros increased to 18% of overall inflows.
The report added that the SaaS (Software as a Service)-based and fintech players maintained the deal value while consumer tech fell. The year also saw many investors raising their largest ever India-focused funds.
According to a joint annual study by Bain & Company and the Indian Venture and Alternative Capital Association, the year 2022 saw a rethinking of venture capital investments in the nation due to growing macroeconomic uncertainties and recessionary fears (IVCA).
Despite a 33% reduction in deal value, from USD 38.5 billion in 2021 to USD 25.7 billion in 2022, the domestic startup ecosystem was stated to have added 23 unicorns, according to the research. Funding decreased primarily in the second half of the year as macro headwinds grew stronger.
According to Arpan Sheth, partner at Bain & Co, overall funding saw a drop in 2022, led by a decline in late-stage large deals. Yet with such severe constriction, deal volume for early-stage companies increased to over 1,600 venture capital investments in 2022 thanks to maintained momentum.
The ecosystem has undergone fundamental changes as VCs have shifted their attention to unit economics and startups have had a difficult year due to numerous regulatory obstacles, layoffs, and emerging corporate governance issues.
The funding for SaaS stayed consistent with 2021 highs, and early-stage deal making experienced sustained pace, despite the overall weakening.
While macro difficulties would continue to have an influence on funding moving forward, he noted that 2023 might see the creation of a more resilient ecosystem in the nation.
Rajat Tandon, president of the IVCA, claims that the alternative investment asset class has proven to be remarkably resilient over time. While 2022 was a year that signalled the need for PEs and VCs to adjust in the face of novel problems, it was also a year that saw record fundraising and all-time high dry powder availability. This only serves to increase confidence among foreign investors in the nation as one of the few areas of growth.
“We remain optimistic about the long-term growth prospects of the industry and its ability to navigate uncertainties, identify opportunities,” he added.
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