Mumbai startups see 44% decline in funding in one year

MUMBAI: Mumbai, which spawned a bunch of high-profile startups like Housing.com and attracted millions of dollars in investor capital over the past few years, registered a 44% decline in funding deals in 2016, even as Pune managed to buck the slowdown.

Mumbai struggled as its startup epicenter Powai saw many shutdowns last year, including the likes of TinyOwl, taking away the sheen from the city as a prime location for young ventures to flourish. The city racked up $232 million (over Rs 1,550 crore at current exchange rate) worth of funding across 151 deals last year; falling from 233 deals accounting for $419 million (about Rs 2,800 crore) in 2015, said data released by VCCEdge, a NewsCorp-owned online financial research platform.
Pune, on the other hand, received $52 million (Rs 350 crore) worth of funding last year compared to $39 million (Rs 260 crore) in 2015. It also registered a 69% annual increase in the number of financing deals compared to Mumbai.The number of funding deals in Pune went up from 35 in 2015 to 59 last year.

Investments in startups have come down dramatically after a few years of excessive capital coming into young tech startups in India. Last year, startups in Maharashtra collectively scooped up $285 million (Rs 1,910 crore) as against $496 million (Rs 3,300 crore) in 2015; a drop of about 42% in terms of deal value, the data said.

"One of the reasons is that a lot of startups have moved from Mumbai to places like Bengaluru where there is a bigger tech pool and cheaper talent, along with a lower cost of living," said Aseem Khare, founder of hyper-local startup Taskbob, which recently shut operations.

Despite the decline in big financing rounds, angel and seed funding of startups in Maharashtra as a percentage of the total number of deals touched a five-year high of 80% in 2016. “The rise in early-stage funding in the state is encouraging from the viewpoint of promising business ideas. However, the fall in growth capital is indicative of these startups failing to achieve scale, which highlights the need for more startup incubators in the state,“ said Nita Kapoor, head, India New Ventures, News Corp, and CEO, News Corp VCCircle.

Rehan Yar Khan, founder and partner at venture capital fund, Orios Venture Partners, said, “Mumbai does not have any big startups because as these companies grow, they move to cities like Bengaluru which have cheaper talent. Ola and Quikr originated in Mumbai but moved to Bengaluru when they needed to expand and hire more people.Cities like Bengaluru, Hyderabad and Pune are technically cheaper cities with easy access to talent.“

Financial technology received the maximum funding with $27 million (Rs 185 crore) last year.