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Where Has India’s Early-Stage Startup Money Gone?

Why venture capital in India is shifting away from early-stage companies toward later-stage deals.

A sign for the PayTM online payment method, operated by One97 Communications Ltd., is displayed next to bags of spices at a wholesale market in Delhi, India, on Friday, Nov. 25, 2016. (Anindito Mukherjee/Bloomberg via Getty Images)

Karishma Mehrotra


December 9, 2019

Adam Walker moved to Bangalore and founded his startup in 2015 to “solve the late payment problem in India.” His company, Hummingbill, was acquired not even two years in. For the past two years as an associate at Montane Ventures in Bangalore, he has learned to temper any lingering “India Shining” dreams. “The market is actually too small in India,” he told The Juggernaut. Walker now focuses on Indian companies that sell to the global market within only two industries: software-as-a-service (SaaS) and medical technologies. SaaS has no geographical restrictions, and medtech in India has less stringent regulations and greater access to data. This helps the companies commercialize “on day one,” he said. “Otherwise, they’re almost dead in the water.”

Walker’s cautious approach to funding speaks to the shifting winds in India’s funding landscape. India appears to be a booming tech ecosystem, home to the third-most startups in the world and increasingly available funding. According to Crunchbase, there are over 10,000 registered startups in the U.S., 5,850 registered startups from China, and 3,467 registered startups from India. Private tech startups in India have collectively raised $11.3 billion this year — a jump from last year’s $10.5 billion, based on Tracxn data.

Yet, funding is increasingly skewed toward late-stage deals and unicorns. The skew is particularly stark when compared to mature startup ecosystems like North America, where Crunchbase shows that seed and early-stage funding accounted for 41% of total funding raised this year, through the third quarter. In comparison, according to Tracxn data, seed and early-stage funding in India accounted for only 24% of total funding raised this year, through November 20, 2019. The number of seed and early-stage deals has also declined. This ratio doesn't account for America's active IPO market in 2019, which replaced large late-stage funding rounds, but the ratio does account for the fact that India had no tech IPOs this year. 

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