In the first half of the calendar year 2024, Indian startups raised a total of $5.3 billion in funding, reflecting a slight decrease of 1.8% from the $5.4 billion raised during the same period in 2023. According to the Inc42 H1 2024 Startup Funding Report, this performance indicates stability in the funding landscape, especially compared to the 10% year-on-year (YoY) decline witnessed in the first half of 2023.
A Closer Look at H1 2024 Funding Trends
The sequential increase in investment from $4.4 billion in the second half of 2023 to $5.3 billion in H1 2024 is noteworthy, despite the YoY comparison showing a slight decline. This 20% rise is noteworthy, particularly in light of the two years of slow financing activity. Additionally, there were 7% more finance deals—from 470 in H1 2023 to 504 in H1 2024—and they improved 15% in a row.
Bengaluru has managed to hold its title of India’s most backed startup city, having closed 134 deals totaling $1.57 billion. Mumbai raised $1.49 billion in 114 deals, trailing closely behind. These cities are still the hubs of Indian startup culture.
Sectoral Breakdown of Funding
In H1 2024, the enterprise IT and fintech sectors dominated the fundraising scene. Driven by big investments like Perfios’ $80 million unicorn round, the fintech industry alone accounted for $1.02 billion across 84 deals. With investments in artificial intelligence (AI) businesses like Vodex, GreyLabs AI, and Unikon.ai, enterprise tech startups received $813 million over the same number of acquisitions.
Even though it closed the most agreements (102), the e-commerce industry still raised $805 million. Notably, over 82% ($665 million) of this amount was accounted for by Zepto, a unicorn in rapid commerce.
Key Insights and Trends
The median ticket size of funding rounds in H1 2024 decreased by 8% YoY to $2.8 million but showed a substantial increase of 87% from $1.5 million in H2 2023. This indicates a shift towards larger investments in promising startups, despite the overall cautious approach of investors.
One of the standout aspects of H1 2024 was the emphasis on seed and growth-stage companies. These early-stage ventures were the primary drivers of funding activity, while late-stage ventures saw more conservative investment behavior. This trend suggests that investors are looking to nurture potential high-growth startups from an earlier stage.
Geographical and Sectoral Performance
Bengaluru and Mumbai continued to dominate the startup funding landscape in India. Bengaluru’s $1.57 billion raised across 134 deals highlights its ongoing significance as India’s startup capital. Mumbai’s close second position with $1.49 billion from 114 deals underscores its role as a crucial hub for startup activity.
Region-wise, the fintech sector led the charge, with significant funding rounds contributing to its $1.02 billion total. The enterprise tech sector’s $813 million haul was primarily fueled by AI investments, reflecting the growing importance of AI in the tech ecosystem. The ecommerce sector’s high deal volume, coupled with Zepto’s significant raise, highlights the continued interest in quick commerce and online retail.
Consolidation and M&A Activity
The first half of 2024 also saw considerable consolidation in the startup ecosystem, with 37 mergers and acquisitions (M&As) compared to 67 in the year-ago period. This reduction in M&A activity indicates a more cautious approach by companies and investors alike, focusing on strengthening existing operations and strategic growth.
The Future of Startup Funding
The funding landscape for Indian startups in H1 2024 reflects a cautious optimism. The slight YoY decline in funding is overshadowed by the significant sequential growth, suggesting that the market is gradually stabilizing after a challenging period. The increase in deal count and median ticket size points to a selective but focused investment strategy by venture capitalists.
Despite the mixed performance, the flat funding numbers indicate that investors are adopting a wait-and-watch approach, holding back significant investments until they see more stability and potential for growth. This cautious optimism is likely to continue into the latter half of 2024, with stakeholders expecting a more favorable funding environment as the year progresses.
Indian startup funding in H1 2024 demonstrated resilience and cautious growth amidst a challenging global economic climate. The focus on seed and growth-stage companies, combined with significant investments in fintech and enterprise tech sectors, highlights the evolving dynamics of the Indian startup ecosystem. As the market continues to stabilize, the potential for a more robust funding environment in the latter half of 2024 appears promising.
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