After a strong start in January, venture fund inflows for Indian startups dropped sharply below the $1 billion mark, accompanied by a decline in the number of deals. The decline can be attributed to a decrease in the number of large funding rounds.
According to data compiled by TheKredible, Indian startups raised a total of $802 million across 98 deals in February. Growth and late-stage funding accounted for $633 million from 24 deals, while early-stage funding contributed $183 million through 63 deals. Additionally, 11 rounds of funding remained undisclosed.
[M-o-M trend]
On a monthly basis, February marked a 54% decline from January, which recorded $1.76 billion. However, when compared to the past three years’ trends, funding in February remained relatively consistent.
[Top 10 growth-stage deals]
In January, contactless payments service provider ToneTag led the chart with $78 million, followed by Udaan and SpotDraft, which secured $75 million and $54 million, respectively. Cashfree, Zeta, and Geniemode also raised over $50 million each. Other notable deals included 75F, Rapido, PMI Electro Mobility, and JQR. Check TheKredible for more details.
Unlike January, which saw three homegrown startups securing over $100 million each, February had no deals exceeding the $100 million mark.
[Top 10 early-stage deals]
SaaS firm Lucidity secured $21 million in Series A funding, while AI startup TrueFoundry raised $19 million. Other notable names in the top five included Spyne, Cognida.ai, and Singulr AI.
[Mergers and acquisitions]
February saw notable consolidation in the Indian startup ecosystem. Perfios acquired CustomerXPs, the fraud detection platform Clari5, for an undisclosed amount. Veranda Learning expanded its presence in commerce education by acquiring stakes in BB Virtuals and Navkar Digital. Meanwhile, Head Digital Works strengthened its portfolio with the acquisition of online poker platform Adda52, among others.
[City and segment-wise deals]
In February, Bengaluru-based startups secured $462.69 million across 46 deals, accounting for 57.64% of the total funding. Delhi-NCR followed with 21 deals and $154.59 million (19.26%). Mumbai saw 15 deals, attracting $142.65 million (17.77%), while Pune and Hyderabad had comparatively lower activity, with 5 and 3 deals, respectively.
Fintech led the sectors with $183.62 million in funding, followed by e-commerce with $156.8 million. SaaS secured $147 million, while AI, healthtech, EV, and automotive also raised notable amounts. Smaller sectors like logistics and deeptech attracted funding, while agritech and consumer electronics received the least. However, the table shows a different trend when it comes to the number of deals.
[Series-wise deals]
In February, seed funding led in deal volume with 32 deals, followed by Series A, pre-Series A, and pre-seed with 15, 12, and 10 deals, respectively. Series A funding secured $139.2 million, accounting for 17.34% of the total funding raised. In terms of amount, Series B saw the highest funding, with $228 million across 7 deals.
[Shutdowns, key hires, and departures]
Flipkart has decided to shut down ANS Commerce, its full-stack e-commerce enabler. Entrackr exclusively reported the development.
In February, the startup ecosystem saw significant leadership transitions, with 13 senior executives—including CEOs, MDs, CPOs, co-founders, and managing partners—stepping down from their roles. At the same time, over 28 key executive positions were filled, marking a wave of transformation. For a detailed breakdown of these changes, click here.
[Trends]
Funding after a long gap: Amazon-backed ToneTag became one of the rare startups to secure funding after a seven-year hiatus. Similarly, Cashfree raised funds after four years, while Zeta (equity) and Oxyzo (debt) secured investments following a three-year gap.
Dominance of SaaS and AI: Early-stage deals were predominantly driven by SaaS and AI startups. According to data, out of the $180 million raised in early-stage funding, SaaS and AI startups accounted for nearly $100 million in February.
Quick commerce boost: Food tech giant Zomato invested $178 million into its quick commerce subsidiary Blinkit, while Swiggy infused $117 million into its supply chain unit Scootsy Logistics to strengthen its quick commerce platform, Instamart. While both companies are now public, this is likely to influence other players in the quick commerce space.
[Conclusion]
February numbers, while relatively unimpressive considering the high expectations built into the system now, do indicate a certain amount of vitality in the system that is here to stay. Large deals have cooled off primarily due to the extended cooling down of the stock market as well, where even some recent startup IPOs have floundered after a strong start. Especially as lock in on shares bought by anchor investors ended. The weak sentiment is bound to have an impact on the domestic market as well, where homegrown VCs and family offices have been playing an increasingly larger role when compared to the erstwhile giants like Softbank, Tiger Global and the rest.
The best indicator of the new cautiousness is in the categories like quick commerce, where an outsider would be tempted to believe that the good old days of raise and burn funds for market share are back. However, it has actually been a much more attritional route taken by established firms, rather than a discounting war. Firms have allowed cash rich newcomers like Zepto to grab market share rather than fight it with bigger discounts. The lesson from the past about the ephemeral nature of such market share gains has obviously been learnt well.
Looking ahead, while there might be the risk of a somewhat extended period of ‘slowdown’ as it is, we believe India’s startup ecosystem has the energy behind it to eventually crack open new categories that will bring in investors. Be it AI, high tech niche manufacturing or Healthcare. The time is ripe for the next batch of unicorns to step up and be seen, not just sought.