Fundraising through new-stock issuances by Southeast Asian startups held steady in the first half of 2022 but declined more than 30% on the year in the July-September quarter, DealStreetAsia reports. In India, startups raised a total of US$26.3 billion in 2022, down nearly 40% from the previous year, according to Indian data company Tracxn.
Worldwide, fundraising from January to November fell more than 40% on the year, according to London-based investment data company Preqin.
The drop was even sharper than the 20%-plus declines seen in 2001 and 2002, after the dot-com bubble burst, and the fall of more than 30% in 2009, after the global financial crisis. Startup fundraising in 2022 decreased by 45% in the US and by half in China.
In some ways, 2022 can be seen as the fast that followed the feast of the year before. Global startup investment in 2021 surged 130%, according to Preqin. Even after a 40% drop, 2022’s tally was still 40% higher than 2020s and more than double that of 2017.
The same is true for India, which saw a 170% increase in 2021. The 2022 figure is almost double that of 2017 and is still high by historical standards.
Venture capital investment attitudes around the world have done a 180-degree turn since last year. Until then, startup founders had been focused on growth above all else, giving free rein to spending. Since Russia’s invasion of Ukraine drove up energy prices and accelerated inflation, prompting central banks to raise interest rates, startups have been forced to put cash generation first.
Startup founders are struggling to adapt to the drastic changes in the environment. Indian online education company Byju’s, said to be the most valuable startup in the country, announced in October that it would cut 2,500 jobs, or 5% of its workforce.
Even as it moved to lay off thousands, the company splashed its logo on televisions worldwide through a roughly US$40 million World Cup sponsorship deal. The contrast triggered a backlash in India.
Byju’s faces a test of its ability to manage costs and its image as it looks for an opportunity for an initial public offering. Other startups, both listed and unlisted, are likely to face their own tough choices in 2023.