[Weekly funding roundup July 20-26] VC fund inflow drops to below $100M level

The Union Budget had a lot of positives for the Indian startup ecosystem, but it does not seem to have trickled down into the area of venture capital funding as it dropped to the third lowest level for the year to date.

The total funding for the last week of the month touched just $71 million, cutting across 16 deals. In contrast, the previous week saw total funding of $226 million.

The $71 million figure is the third lowest for the year to date, with the previous two lows being $61 million in January's first week and $66 million during the first week of April, according to YS Research. The other time it dipped below $100 million was in the last week of January at $76 million.

This is the fourth time that venture capital funding on a weekly basis has dropped below $100 million for the year. This trend reveals the challenges that the Indian startup ecosystem continues to face in terms of raising capital.

The biggest obstacle for the Indian startup ecosystem has been the steady absence of large ticket deals. Funding on a weekly basis has crossed the $500 million level just twice this year. In general, VC inflows have been averaging around the $100 million to $200 million range.

The Union Budget turned out to be hugely positive for the Indian startup ecosystem with the government finally announcing an end to the Angel Tax system. The change in the long-term capital gains tax on unlisted securities is certainly going to draw the attention of investors to startups.

Additionally, the announcement of a Rs 1,000 crore venture capital fund for the space sector is expected to provide a bigger boost to the segment, which is expected to be a game changer in the years to come.

Key transactions

Unimech Aerospace raised Rs 250 crore ($30 million approx.) from Steadview Capital Mauritius Ltd, ValueQuest Scale Fund, and Evolvence India Fund IV Ltd.

Wealthtech startup Stable Money raised Rs 123.56 crore ($15 million approx.) from RTP Capital, Lightspeed India, and Matrix Partners.

Flexible workspace provider Incuspaze raised $8 million from India Inflection Opportunity Fund (IIOF) and other financial institutions.