2.4k new-age tech cos wound up biz in 2022


NEW DELHI : Indian startups faced a challenging year, with 2,404 of them shuttering in 2022, more than double the 1,012 that had shut shop in the previous year, according to data from Traxcn.

About 266 startups that shut down this year were funded by venture capital, angel investors, family offices or institutional investors. The companies had raised close to $290 million, the data showed.

Graphic: Mint

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Graphic: Mint

The number of startups shutting down in 2022 is also higher than in the previous two years, indicating that it has been difficult for these companies to stay afloat as investors become more cautious amid global economic uncertainties. Only 2018 saw more startup failures in the past five years, with 3,484 closures.

“Startup investments in 2021 were exuberant, with new financing records being set in practically every industry. 2022 tempered the investor mood, and founder expectations, resulting in the gain of the overall ecosystem,” said Manu Rikhye, a partner at Merak Ventures.

Edtech was among the hardest-hit segments in the Indian startup ecosystem, with 25 funded startups in this sector closing their doors. Funding for edtech companies in India plummeted to $2.4 billion in 2022, down from $4.1 billion in the previous year, according to Tracxn. Among notable edtech companies that wound up in 2022 were Lido Learning, Udayy, SuperLearn, and Crejo.fun. The closure of Lido Learning, which had raised $20 million in funding, resulted in the loss of over 1,200 jobs.

Edtech startup Udayy shut down in June after exploring options such as pivoting to a different business model and even attempting to sell the company. The company employed around 100 people.

The e-commerce segment in India was also impacted in 2022, with close to 50 funded startups failing to survive the so-called funding winter. Among these companies, e-commerce enablement platform ShopX had raised the most funding at $50 million but ultimately filed for insolvency after defaulting on its interest payments.

Another e-commerce startup that shuttered its doors in the segment is business-in-a-box platform Protonnm, which shut shop within close to six months after raising 67 crore in a seed round led by Matrix Partners in July.

Many other e-commerce startups that shuttered were still in their early stages, including Accel-backed Shopmonk and Axilor Ventures-backed Inroadz.

Capital raised by Indian startups fell by 39% to $25.4 billion in 2022 from $41.8 billion the year before, Traxcn said.

For raising cash, many startups tapped venture debt while a few others opted for flat rounds to stay afloat. “Businesses that had a mandate for growth without considering unit economics took a beating,” Brijesh Damodaran, co-founder and chief investment officer of Auxano Capital, said.

However, the funding crunch not only impacted edtech and e-commerce firms, but also healthtech, media and fintech.

The healthtech and media sectors faced challenges in 2022, with approximately 26 and 24 funded companies shutting down, respectively. The fintech segment also saw 26 startups fail to make it to 2023.

These shutdowns also resulted in widespread layoffs. Nearly 19,000 employees across the tech ecosystem were laid off in 2022, Mint reported. A significant portion of those impacted was from edtech startups.

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