While in terms of absolute values, the usual suspects — Bangalore, Delhi and Mumbai —continued to top the table in 2022, these cities recorded a decline in total investment raised by startups on a year-on-year basis. Chennai, Hyderabad and Pune emerged as top gainers in terms of deal value.
Data sourced by TOI from research firm Venture Intelligence showed that Chennai and Hyderabad were the big-gest gainers (see graphic) . Experts told TOI this is likely due to B2B and enterprise tech emerging as top picks in a difficult funding environment, and investors getting selective with deploying dry powder to more economically solid companies. Investors noted that their portfolio today is more diverse with successful bets made on founders from Jaipur, Surat, Coimbatore and other non-metros. Investors said there is a drive among entrepreneurs from these cities, and the DNA of these founders is mostly about setting up an efficient, profitable business and they are, by nature, frugal.
VC firm Inflection Point Ventures (IPV), which clocked the largest number of early-stage deals in 2022, said that technology simplified access to entrepreneurs and ideas across the country. “2022 showed that, as investors, we need to get out of the FOMO mentality — ideas and fiscal discipline are more important than where founders come from,” IPV founder & CEO Vinay Bansal said.
Arali Ventures managing partner Arun Raghavan said that as the market matures, support ecosystems for startups take shape in places beyond the usual hubs. “The access to entry-level talent is also better and cheaper in smaller cities,” he added.
Research firm Tracxn’s data also showed that Pune, Chennai and Hyderabad have grown their share of funding and saw hectic unicorn activity in 2022. Three startups turned unicorns this year from Pune, two from Chennai, and one from Hyderabad, Tracxn co-founder Neha Singh said.
Ideaspring Capital managing partner Naganand Doraswamy said that 2021 was perhaps an anomaly and a “year of irrational exuberance”, thus making 2022 a funding winter in comparison. “But learnings like ensuring profitability, being frugal and achieving unit economics are key lessons from 2022, and will be taken forward for 2-3 years,” he said.