In a recent survey conducted by Inc42, nearly half of venture capital (VC) and angel investors expressed optimism about the impact of Prime Minister Narendra Modi’s National Democratic Alliance (NDA) securing a third consecutive term on the Indian startup ecosystem. Specifically, 46% of investors believe the results of the 2024 Lok Sabha elections will bolster overall investor confidence in Indian startups.
Survey Insights: Investor Sentiments and Expectations
The Inc42 survey revealed that while 32% of participants think the elections will not significantly affect investor sentiment, 18% are taking a cautious wait-and-watch approach. Only a small fraction, 4%, believe the elections will lead to sector-specific actions.
This positive outlook comes amidst a challenging period for Indian startups, often referred to as the “funding winter.” According to Inc42’s ‘H1 2024 Startup Funding Report,’ Indian startups raised $5.3 billion in the first half (H1) of 2024, a slight decrease from the $5.4 billion raised during the same period in 2023. However, the number of deals increased by 7%, from 470 to 540.
Anticipating a Funding Revival
Despite current challenges, investors anticipate a revival in funding in the latter half of 2024. Siddarth Pai, founding partner and CFO of 3one4 Capital, noted that while political uncertainty remains a global issue, India’s political stability following the general elections has reassured investors. Reflecting this sentiment, 93% of survey respondents see 2024 as a pivotal year for the Indian startup ecosystem, with only 7% expecting ongoing funding corrections.
Government Initiatives and Investor Optimism
The Indian government’s recent budget, presented by Finance Minister Nirmala Sitharaman on July 23, 2024, has introduced several measures aimed at boosting the startup ecosystem. Key announcements included the abolishment of the angel tax, a significant relief for startups, and the establishment of a ₹1,000 crore VC fund to support the country’s space economy. Additionally, the government plans to set up e-commerce export hubs under a public-private partnership (PPP) model to help MSMEs and traditional artisans reach international markets.
Sector-Specific Benefits from PPP Model
Investors are particularly optimistic about the PPP model’s potential to drive growth in various sectors. According to the survey, 39% of investors believe startups in the healthcare sector will benefit the most from increased public-private collaboration. Clean energy startups are also expected to gain significantly, with 29% of investors highlighting this sector. Other sectors poised to benefit include financial inclusion, waste management, and education.
A Promising Future for Indian Startups
The survey results indicate a strong belief among investors that the Modi government’s third term will positively impact the Indian startup ecosystem. With political stability, targeted government initiatives, and a collaborative PPP model, the stage is set for a potential turnaround in funding and growth for startups across various sectors in India.
