TLDR:
- Private equity and venture capital funding for Indian startups increased in June to the highest level in two years.
- Many startups are relying on existing investors to provide bridge funding as funds from previous rounds start to dry up.
Existing investors have become crucial lifelines for late-stage startups in India as the funding environment becomes more challenging. Many startups are facing a funding crunch as they have had to stretch the funds from their last raise that happened over 24 months ago. As a result, existing investors are stepping in to provide bridge funding rounds to help these startups bridge the gap until they can secure new funding.
One of the notable examples is Uniqode, a cloud-based technology venture that converted standard websites into mobile-ready versions. The company raised $25 million in a Series A round in 2023, led by Telescope Partners, at a valuation of ₹1,155 crore. This round gave an exit to some early investors, including Blume Ventures. Many startups like Uniqode are relying on their early investors to help them navigate the challenging period known as the “death valley,” where startups have begun operations but have not yet generated revenue.
The increase in private equity and venture capital funding for Indian startups in June signals a positive trend, with growth-stage deals leading the way. However, many of these deals are being led by internal investors of the company, indicating a trend where startups are turning towards existing investors for support. These bridge funding rounds are essential for startups looking to extend their runways and improve their unit economics before attracting new investors.
While some startups have opted for silent internal rounds to avoid disclosing bailouts or short runways, others have faced down rounds due to lackluster performance. Investors are cautious about valuations, leading to a decrease in the number of external rounds. The funding environment remains challenging for startups, but existing investors continue to play a vital role in supporting late-stage startups through bridge funding rounds.
