India added over 1,300 tech startups in the 2022 calendar year, taking the total tally of tech startups to 25,000-27,000, says a new report by Nasscom and Zinnov.
The report said India continues to be the third largest tech startup ecosystem globally. The country added the second highest number of unicorns in the world, with over 23 added in the 2022 calendar year. Simultaneously, the potential pipeline of unicorns expanded to over 170, growing at a pace equivalent to 2021.
Startup funding, at $18.2 billion, dropped 24% in the year, compared to the year before. However, this was higher than the $13.1 billion in 2019. Almost 1,400 unique startups received funding last year, 18% higher than in 2021. For 47% of these startups, it was their first round of funding.
Despite the slowdown, the seed and early-stage investments in 2022 was higher than in any year since 2019. The study reveals that both early-stage ($5.9 billion) and seed-stage ($1.2 billion) investments grew between 25%-35% over 2021. Last year, tech startups in the seed-stage secured 1,018 investments. Late-stage investments bore the brunt with a decline of 41% in deal sizes greater than $100 million. This was due to considerable correction in the global public markets, particularly in technology stocks that saw a significant drop in valuation. Interestingly, non-unicorns received 66% of the total investments in 2022.
Last year saw 30% higher corporate participation as compared to 2021. Over 300 corporates are actively investing, acquiring, or partnering with tech startups. Debjani Ghosh, president of Nasscom, said, “Navigating from an era of abundance to the era of constraints, the Indian tech startups need to look beyond valuations to value creation and scaling up. Despite the current downturns, opportunities abound for innovative companies that are leveraging emerging technologies to create actionable impact while prioritising business fundamentals over growth.”
Pari Natarajan, CEO, Zinnov, said, “In the face of market headwinds, a long funding cycle, and reduced valuations, Indian tech startups held strong in 2022.. In fact, Indian tech startups are moving back to the fundamentals of technology with many deep-tech startups emerging, that are new to India, new to the world. What is remarkable is the ecosystem’s maturity, where founders are intentionally prioritising profitability over valuation and the investor trust, despite macroeconomic variables at play. This will pave the way for growth in 2023 and beyond.”
Nasscom and Zinnov also conducted a survey with over 100 startup founders at various funding stages and industry sectors. The findings reveal that access to quality talent, low customer uptake, and cash flow crunch were amongst the primary challenges that founders faced last year. Business expansion along with fundraising are amongst the top priorities for funded startups this year. Around 44% of the surveyed founders place business expansion as their immediate business priority over the next 6-12 months.