Less than 1 in 3 start-ups that attract seed funding manage to raise follow-on funding in the form of a “Series A” round, says a study by the Chennai-based Venture Intelligence, a provider of data on private company financials, transactions, and their valuations.

Out of the over 2,500 start-ups that had raised seed funding between 2015 and 2022, only 29 per cent (734 companies) managed to raise a Series A round (typically the first round of institutional Venture Capital funding), the study titled “Series A Landscape Report” said.

However, once a start-up attracts a Series A round, its success ratio in raising subsequent rounds of capital improves quite significantly. For instance, 50 per cent of the companies that raised a Series A during the study period, succeeded in raising a Series B round. And, of the start-ups that attracted a Series B round, 62 per cent succeeded in obtaining a Series C round. Of the Series C-funded companies, 70 per cent managed to raise rounds that were Series D and beyond. (The Venture Intelligence study provides an 18-month window for a company to raise the subsequent round).

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The number of companies raising a Series A round grew at a CAGR of 8 per cent from 2017 to 2022. Despite the onset of a funding slowdown in 2022, the number of Series A investments during the year (289) was up 7 per cent compared to 2021 (which saw 269 investments) and 30 per cent above the average of 224 deals recorded in the recent 7 years.

“The total number of Series A deals is a good barometer of the ecosystem’s maturity and a lead indicator for the scale and quality of companies getting built,” said Ganapathy Venugopal, CEO of Axilor Ventures, in the report.

Sequoia Capital India had backed 54 start-ups in the seed round that then went on to raise Series A rounds between 2019 and 2022. It was followed by Blume Ventures, which seed-funded 31 start-ups that then went on to successfully raise a Series A round. They were followed by Chiratae Ventures and Accel India (21 start-ups), and others.

Sequoia Capital India topped the list of most active Series A investors during the 4 year period spanning 2019-22, being a part of as many as 93 Series A rounds, as well as during the calendar year 2022 (when it made 24 such investments). Accel India and Elevation Capital completed the list of Top 3 Series A investors in both the 2019-22 period as well as Calendar Year 2022.

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Blume Ventures topped the list of Seed VC investors in 2022 (making 29 seed investments), while Sequoia Capital India was the most active seed investor in the 4-year period spanning 2019-22. Accel India completed the top 3 in both tables - with 56 and 20 investments during the 4-year period and CY 22, respectively. Interestingly, Info Edge - via its corporate VC initiatives - emerged among the top 3 most active seed investors in 2022, making 16 such investments (joining Sequoia in the third most active seed investor slot).

Axilor Ventures emerged among the top five seed VC investors in both the 2019-22 period (with 46 investments), as well as CY 22 (making 13 investments and sharing the 4th most active slot with Chiratae Ventures).

Elevation Capital led the table of investors listed by “Participation % in Series A investments” during 2019-22. The firm participated in the Series A rounds of 83 per cent of the start-ups that it had invested in as part of its Seed rounds. Elevation was followed by Accel India (75 per cent), Chiratae Ventures (74 per cent) and Kalaari Capital (73 per cent).

“The study highlights how the Indian Early Stage funding ecosystem has matured tremendously in recent years. Despite the current slowdown, the number of funding options available to start-ups in the Early Stage is much richer compared to even three years back,” noted Arun Natarajan, Founder of Venture Intelligence.

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