Start-up funding to reduce by 11-36% in 2020: Reports

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Startup with young man in the night

The Start-up funding in India is assessed to witness a year-on-year (y-o-y) reduction of 11-36 per cent in FY 2020, according to a report given by media platform Inc42. The decline can be mitigated, to some degree, if the growth and last-stage start-ups are capable of attracting high investments and investor attention remains integral in sectors like fintech, ed-tech, online gaming, enterprise tech, e-commerce the report disclosed.

The start-ups may finally raise $11.3 billion, recording a reasonable 11 per cent deterioration when compared to 2019. Though, if big funding takes a hit and capable sector like ed-tech fail to produce sizeable funds from investors, the reduction in funding may be as much as 36.2 per cent to $8.1 billion, analysts at the firm stated. Total funding in H12020 which excludes deals valued at $200 million and above mounted at around $3.2 billion. Fintech and ed-tech sections led the highest number of deals during this period, the report displayed.

Ed-tech firm Unacademy last week entered the unicorn club when SoftBank led a $150-million funding rounded in the company. The Unacademy’s valuation moved $1.45 billion after the investment. The Bengaluru based firm collaborated a handful of other start-ups in the ed-tech space itself that has been making considerable investor interest. In the month of August, billionaire Yuri Milner leading DST Global filled a fresh $122 million in competitor Byju’s, which is likely to invest more funds in the firm.

The valuation of Byju’s company hit $10.5 billion in late June after when it attained the backing of US-based Bond. Lately, Eruditus also raised $113 million from investors, including Chang Zuckerberg Initiative of Facebook, providing it with a post-money valuation of $800 million. In July, the US-based Coatue directed a $100 million funding round in Vedantu.

Approximately 16 of 44 ed-tech funding contracts were taken by online test preparation and education start-ups noted the analysts in a report. In the fintech sector, companies functioning in the lending space recorded the uppermost number of deals. Seed-stage funding, though, reduced to $140 million in HI2020 after moving a peak of $450 million in 2018, on the support of policy hurdles such as angle tax and reduction in the number of new start-up launches. The only outlier is the media and entertainment space that recorded growing investor interest in seed-stage companies mainly due to the prohibition on Chinese apps. Investment in late-stage companies continued largely motionless although the number of deals went up.

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