Earlier this week, B2B fintech startup Perfios became a unicorn after raising $80 million from Teachers’ Venture Growth. The announcement came just six months after the company raised $229 million from Kedaara Capital in its Series D round in September. Others, include dairy tech startup Country Delight, D2C backpacking startup Mokobara, logistics provider Xpressbees and InsuranceDekho.
Country Delight, which closed its Series D in April 2023, secured $20 million in Series E funding in January. Country Delight’s Series D round was raised at a valuation of $615 million, and at $819 million in the next round, according to media reports.
Similarly, InsuranceDekho, which raised one of the largest ever Series A funding in February 2023, secured $60 million in a Series B round in October at a higher valuation of $600 million, according to data sourced by Tracxn. The round was raised at a higher valuation of $600 million, according to media reports.
“We have our eyes set on unit economics. At the company level, we are profitable… this funding will allow us to accelerate our efforts, reach more customers and innovate further,” InsuranceDekho chief executive Ankit Agrawal said in October.
Manu Rikhye, partner, Merak Ventures, expressed similar views: “Companies like Country Delight, Xpressbees, and Insurance Dekho are attracting investment because investors are now prioritizing more than just rapid growth. They are looking at fundamentals such as unit economics. Just a few startups that have followed these principles, gets the attention of high-quality investors.”
InsuranceDekho, Xpressbess and Country Delight did not respond That of mint requests for comments until the time of publication.
Although it is premature to interpret it as a sign of a market bubble, investors believe that private markets have rationalized, and only the best companies secure funding.
“If startups in this environment are funded in eight months, that basically means they are category leaders, demonstrating a clear product market and investors believe there will be a big IPO story within 2-3 years,” the managing director of Matrix- partners Sudiptus. Sannigrahi said.
Sannigrahi’s views mirror the success of Country Delight. When the company initiated its Series D fundraising in May 2022, its year-over-year growth was two and a half times, with revenues soaring 50% within just six months, its co-founder Chakradhar Gade said at the time. “Country Delight now aims to become a leading natural foods business where we are looking to expand our product portfolio to cover all the foods a kitchen needs every day.”
However, these fast rounds pale in comparison to the rapid pace of deal closings witnessed during the peak of the financial boom in 2021, and during the pandemic years when capital was more easily accessible. With the rise of digital opportunities and an expanding addressable market, financing has witnessed explosive growth, aided by higher liquidity and inflationary growth among assets.
However, over the last two years, the markets have witnessed a major correction, with most startups taking longer to close a series. This lag was evident for B2B platform Captain Fresh and payment solutions platform Escrowpay, which had significant gaps between successive funding rounds within a specific series.
Captain Fresh’s Series C round began in September 2023 and continued until February, according to data sourced by Tracxn. On the other hand, Escrowpay saw its series A round start in October 2022 and extend until December 2023.
“Startups like Captain Fresh and Escrowpay are facing difficulties in securing funding, mainly due to challenges such as ambiguous marketing approach or operational inefficiencies,” Rikhye said, adding that this change in the financial landscape has forced these firms to re-evaluate their business models.
Captain Fresh and Escrowpay did not respond That of mint request for comment until the time of publication.
Over the last six months, various funding trajectories underscore the complexity of the market, with investors attributing the gap between successive rounds to various factors, including due diligence.
“Series rounds are taking a little longer to close now versus two years ago because the level of due diligence done by an investor has gone up several notches…earlier multi-100 million dollar rounds used to close quickly without due diligence, which is the wrong incentive structure for the entire ecosystem,” said Matrix’s Sudipto. This is good for the markets in the long run, as only resilient founders will support, he added.
According to Sajith Pai, partner at Blume Ventures, while the typical gap between two consecutive rounds should be 18-24 months, there are various factors to consider if they happen too quickly: the round may have taken longer to close, lacked prominent investors. , or faced evaluation resets and other legal obstacles. This could cause the ads to pile up, he said.
Growth investors have become very selective with their investments, and startups can use a series of rounds to make it look like a big round without going into specific companies, Pai explained.
Venture capital startups, such as 8i Ventures, said deal cycles are getting longer. “It’s not just specific to later stage cycles, even seed deals take 4-6 months, which is alarming,” said Vikram Chachra, founding partner of the firm. As we enter the third year of financial winter, it is usually during periods like this when some of the biggest technology companies are born and, accordingly. “We are optimistic” about investments in India, he added.
Earlier this week, 8i Ventures launched a seed funding initiative. With investments of up to $2 million across pre-seed to early revenue stages, it seeks to help foster growth across a variety of industries, the company said in a statement. The VC firm has previously backed the likes of Slice, M2P, Easebuzz and Blue Tokai.