In the first half (H1) of 2024, there was a phase of cautious optimism in Indian startup investment. Despite the fact that overall funding was essentially unchanged from H1 2023, there were encouraging indicators that suggested the funding winter of the previous two years might be ending.
Stable Funding Numbers
In H1 2024, Indian startups funded a total of $5.3 billion, a tiny 1.8% less than in the same period of 2023. This steadiness suggests that investor sentiment may be improving after declining by 10% in H1 2023. Funding saw a notable 20% increase sequentially from H2 2023, highlighting this encouraging trend even further.
Seed and Growth Stages Thrive
A notable shift in investor focus emerged in H1 2024. Seed-stage startups received a welcome boost, with funding growing 23% year-on-year to $589 million. This growth is likely fueled by the increasing adoption of Artificial Intelligence (AI) in early-stage ventures, with enterprise tech leading the charge. Similarly, growth-stage funding displayed strong investor confidence, rising 21% YoY to $1.7 billion.
Late Stage Funding Takes a Breather
While early- and mid-stage investment continued to trend positively, late-stage deals saw a halt. There was an 18% decrease in total investment compared to H1 2023 as a result of the number of mega agreements (above $100 million) falling to a seven-year low. Nonetheless, the number of deals in this category unexpectedly increased by 47% year over year, suggesting a change in investor strategy toward more modest late-stage investments.
Fintech and Enterprise Tech Steal the Show
When it comes to sectoral trends, fintech and enterprise tech emerged as the clear winners in H1 2024. Backed by Perfios’ $80 million unicorn round, the fintech sector secured $1.02 billion. Enterprise tech followed closely behind, raising $813 million, with a surge in AI-powered SaaS startups like Unikon.ai, GreyLabs AI, and Vodex driving the growth. Interestingly, e-commerce witnessed the highest deal count (102) but relied heavily on quick commerce giant Zepto’s $665 million investment, accounting for over 82% of the sector’s funding.
Bengaluru Retains its Crown
Bengaluru continued its dominance as India’s startup capital, attracting $1.57 billion across 134 deals. Mumbai emerged as a strong contender, pushing Delhi to the third spot. The city’s financial muscle, coupled with Zepto’s mega-round, helped it raise over $1.49 billion through 114 deals. Delhi NCR managed to secure $1.06 billion across 91 deals in the first half of 2024.
A Diversifying Investor Landscape
The H1 2024 report highlights a growing pool of investors backing Indian startups. Over 160 unique investors participated in funding rounds, signifying a shift beyond traditional VCs and PEs. This diversification in investor base bodes well for the future of Indian startups.
Profitability Takes Center Stage
Unlike the free-flowing VC money of 2020 and 2021, investors in H1 2024 displayed a strong preference for sustainable and profitable ventures. This focus on long-term viability is a welcome change for the Indian startup ecosystem, and the H1 2024 funding trends reflect this shift in investor priorities.
While H1 2024 paints a cautiously optimistic picture for Indian startup funding, the complete recovery from the funding winter might still take some time. Nevertheless, the resilience and adaptability of Indian startups, coupled with a more discerning investor landscape, pave the way for a more sustainable future for the Indian startup ecosystem.
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