Dry season for startups continues to become drier, as funding activity has further reduced with total number of deals struck in Q3 amounting to 291, a 6% reduction compared to the previous quarter, says data from Xeler8, a data cruncher that works using machine learning and analytics.

“Surprisingly , early stage deals have reduced by 20%, happening for the first time in 2016, which saw a good number of early stage deals,” said Rishabh Lawania, Founder, Xeler8.

The number of early stage deals was 162 this quarter, a significant reduction from 202 deals in Q2. Also, the total deal size has significantly reduced to $ 1.36 billion, from $ 1.5 billion in Q2, even when there was an increase (50%) in the number of later stage deals.

Lawania added that there is a spurt in the number of mergers and acquisitions, with 65 deals, compared to 48 deals in the previous quarter. “Bigger players are looking to consolidate and are either acquiring or acqui-hiring startups to expand their business,” he said.

Commenting on the reduction in the number of early stage deals, Rajesh Sawhney , Founder GSF accelerator said,“There is a squeeze in the seed stage and series A deals, as VCs and investors are taking longer time to make decisions and hence, raising a series A deal is taking longer. There will be an increase in the funding in 2017, as this year was a detox year for Indian startups, after the valuations ran ahead of themselves in 2015.”

However, he said that in the screening process at the GSF accelerator, the applicants were of good quality and early stage investors can place bets. Contrary to the popular opinion on the sector dwindling, e-Commerce still remains the preferred industry for investors with 46 startups coming up with more substantial business models, followed by 26 SaaS-based startups.

Healthcare and Fintech still surprises to innovate more and have bagged 22& 21 deals respectively. Besides, new innovative startups are getting funded.

Source: Times of India