Early-stage VC investments grew 30% year over year in the first quarter of FY23

4 Jul 2022 , 10:39 AM

According to data gathered by analytics company Tracxn Technologies, late-stage investments decreased by almost 11% to $9.1 billion during the first quarter of 2022—23 from $10.3 billion a year earlier.

In the first quarter of 2022—23 (FY23), early-stage venture capital (VC) investments in India increased by almost a third compared to the same period in the previous year as investors became more cautious and placed smaller but longer-lasting commitments.

The previous three months have seen a decline in the value of global financial markets as central banks around the world have increased interest rates to rein in skyrocketing inflation. Large investors are reducing their exposure to high-growth technology businesses as a result, which has had the most impact on tech valuations globally.

VC firms have said that they will reduce their investments this year, including some of the world’s most aggressive investors, such as Tiger Global Management and SoftBank. Consequently, VCs are investing more aggressively in the early phases, which are characterized by smaller deals and lengthier investment cycles.

Early-stage investors Sequoia Capital, Matrix Partners, Accel, and Elevation Capital have launched or are in the midst of raising their largest-ever India-focused funds, indicating more available cash for such investments.

Sequoia Capital India has set aside $300 million for early-stage investments through Surge, its startup accelerator program. Sequoia Capital India recently invested $2.8 billion in a fund for Indian and Southeast Asian entrepreneurs. Additionally, the VC firm recently increased the $3
million cap on its seed-level investments made through Surge.

According to the data, late-stage investments (Series B and higher) decreased more than 11% to $9.1 billion during the first quarter of 2022—23 (FY23) from $10.3 billion a year earlier.

The average size of late-stage agreements, though, barely moved from $77 million in the first quarter of FY21 to $75 million in April-June 2022.

For the first time in about a year, late-stage acquisitions fell below the $1 billion threshold in May 2022. However, the statistics revealed that late-stage deals picked up steam in June 2022 and exceeded $1.8 billion.