Cockroaches in demand as unicorns catch a cold this funding winter
In November, Priyanka Bansal (name changed), founder of an edtech company, was looking to raise about $12 million in Series A funding. Bansal was confident about getting more than one term sheet and the valuation she was demanding.
Her thesis was simple: early-stage funding was still not hit by the much-talked-about funding winter, and her startup was catering to higher education and upskilling, a niche among edtechs that was hot even this year, when startups confronted a funding winter. As central banks globally raised interest rates to stem inflation that accelerated amid the Russia-Ukraine war in Europe, throwing financial markets into turmoil, funding to startups dried up.
Startups in India raised close to $41 billion in equity rounds in 2021, which meant that companies had a lot of cash on their books. But funding slowed down consistently since the first quarter of this year amid the macroeconomic headwinds.
In 2022, Private Equity (PE) and Venture Capital funding dropped to $25.9 billion, according to data collated by private market intelligence platform Tracxn Technologies. In the last three quarters of 2022 in fact, funding halved to $18.1 billion over the same period of 2021, the data showed. “Series A and early-stage rounds were active even this year, and investors were looking for sectors that were growing,” said an advisor to Bansal’s company, requesting anonymity.
“She (Bansal) was very confident about cracking it. Their TAM (Total Addressable Market) was large, so naturally, their revenue potential was large and that’s the story they were planning to sell. Honestly, in my opinion, it’s a very good story to tell for an early-stage company in a booming market,” the advisor added.
