Due to the slowdown in large startup financing, monthly startup investments plunged 50% YoY to $1.6 billion. Growth investments accounted for 51% of all investments in the month and were the highest.
Vivek Soni, partner and national Leader, Private Equity Services, EY said, “The US Fed has started tightening monetary policy with a 50 bps interest rate hike and business risk premium /discount rates have gone up globally, which has had a significant negative impact on valuations of listed loss-making but growth-oriented start-ups. This is expected to have a spillover effect on the private capital side as well. Both start-up valuations and deal closures could see some slowdown in the coming few months.”
Despite the decline, inflows in the Indian market continue to remain strong, especially in media and entertainment — which saw Verse Innovations bag $805 million, the largest funding amount in April. A post-pandemic surge in content consumption has spurred an increase in investments in the sector, with $1.5 billion received so far.
Lastly, with capital markets becoming choppy and startup IPOs getting delayed or revised, exits in April plunged to $1.2 billion across compared to $2.3 billion last month.
“While the US Fed tightening is expected to reduce global liquidity, the larger international funds are sitting on large amounts of dry powder raised last year. India, which remains one of the few large economies with strong growth, is expected to lead emerging market capital allocations. Downside risks that can temper growth expectations and PE/ VC investment activity include rising inflation, oil prices, dollar appreciation vs Indian Rupee, and rising Indian interest rates”, added Soni.
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