COVID-19 impact | Startup funding in June quarter at $1 billion - lowest in five quarters

Representative image

Startup funding fell 66% in the June quarter compared to the March quarter in 2020 to $1 billion, the lowest in five quarters- a sign of how badly the Covid-19 pandemic has hit startups and investors.

Indian startups raised $1 billion across 116 deals in the second quarter of 2020, compared to $3 billion in the first quarter with 156 deals, according to data from Venture Intelligence, a startup data tracker.

In the June quarter, large deals were led by software startup Postman raising $150 million from Charles River Ventures, with its valuation rising 6x to $2 billion, making it India’s latest unicorn- valued at over a billion dollars.

Ed tech firm Byju's also raised $100 million from Mary Meeker's BOND Capital, valuing it at over $10 billion.

Digital book-keeping startup Khatabook, which raised $60 million led by B Capital Group, and online grocer BigBasket, which raised $60 million led by South Korea’s Mirae and China’s Alibaba, were some of the other large deals in the quarter

Sectors such as grocery, software-as-a-service and healthcare are some of the sectors which saw maximum interest, as many of these firms were boosted by the pandemic, while most others saw months of zero revenue and had to lay off hundreds of employees.

To be sure, the data doesn’t fully indicate the extent of funding difficulty during the pandemic.

"Some of the deals, while recorded in Q2, were deals done in Q1 or earlier, so counting it as a ‘Covid deal’ may not be fair. If the same deal had been discussed, during or after the pandemic hit India, it may not have happened," said a partner at a venture capital firm on condition of anonymity.

While businesses have started reopening, and some online brands have already seen revenues recover to pre-Covid levels, investors expect things to get worse before they get better.

In addition to the pandemic and a business slowdown, venture capital funding for Indian startups has also been tougher in the past few months after the government said Chinese investments would need explicit approval from the government. Rising border tensions between the two countries has only worsened sentiment.

Follow our coverage of the coronavirus crisis here