MUMBAI: Indian startups raised $2 billion in funding in the January-March quarter, according to data from market research firm Tracxn. This is about 40% lower than the $3.3 billion the company received from investors in the same period last year.
However, reading quarterly funding trends shows that the ecosystem, which has been suffering from a slowdown in investments since the last 12-18 months, has remained stable. Funding for October-December 2023 and July-September 2023 remained in the $2 billion range.
Investors are betting that deal activity will pick up in the second half of the year as the fundraising winter finally recedes. “Things started to move a little bit late last year. In the seed and early stages, we saw term sheets and subsequent rounds taking place. Post-election, we saw a lot more action in the growth and later stages. We should see it,” Varun Malhotra, partner at Quona Capital, a venture capital firm specializing in fintech, told TOI.
India has already added two unicorns to its fold in the four months to 2024: Bhavish Agarwal’s AI venture Kurtrim and fintech SaaS Perpheus. This doesn’t mean funding will return to 2021 levels, when startups raised nearly $40 billion in funding. That year was an outlier. In the current environment, investors will continue to take time to evaluate deals, especially late-stage deals, but companies that have managed to balance growth and profitability over the past two years are likely to be well-valued. You will be able to get funding for the amount.
“Investors are being selective about their deals. We are not going back to crazy funding and valuations. That phase is over. Investors are looking for sustainable business models. Some of the sectors that boomed during the crisis and some segments of Web 3, for example, have not been able to attract investment,” said Somshbro Pal Chowdhury, partner at Bharat Innovation Fund. Ta. Investors are now exploring new areas such as deep tech and AI, which have more defensible moats, he added.
Funding for startups rose from $462 million in January to $750 million in February and March, data showed, as more domestic investors and small VCs supported early-stage deals. It reached more than $1 million. Abhishek Prasad, Managing Partner, Cornerstone Ventures There will be significant traction.”
Industry insiders say growth deals and late-stage deals are also in the works, but are taking longer to close given investor vigilance. In sectors like quick commerce, where investor appetite is strong, players like Zepto are believed to be in talks for new rounds. Prasad doesn’t expect many down rounds to occur unless a company is in dire need of capital. “There will also be a lot of secondary trading,” he added. “A lot of the funds are reaching the end of their lives in some of the later stage companies.”
However, reading quarterly funding trends shows that the ecosystem, which has been suffering from a slowdown in investments since the last 12-18 months, has remained stable. Funding for October-December 2023 and July-September 2023 remained in the $2 billion range.
Expanding
Investors are betting that deal activity will pick up in the second half of the year as the fundraising winter finally recedes. “Things started to move a little bit late last year. In the seed and early stages, we saw term sheets and subsequent rounds taking place. Post-election, we saw a lot more action in the growth and later stages. We should see it,” Varun Malhotra, partner at Quona Capital, a venture capital firm specializing in fintech, told TOI.
India has already added two unicorns to its fold in the four months to 2024: Bhavish Agarwal’s AI venture Kurtrim and fintech SaaS Perpheus. This doesn’t mean funding will return to 2021 levels, when startups raised nearly $40 billion in funding. That year was an outlier. In the current environment, investors will continue to take time to evaluate deals, especially late-stage deals, but companies that have managed to balance growth and profitability over the past two years are likely to be well-valued. You will be able to get funding for the amount.
“Investors are being selective about their deals. We are not going back to crazy funding and valuations. That phase is over. Investors are looking for sustainable business models. Some of the sectors that boomed during the crisis and some segments of Web 3, for example, have not been able to attract investment,” said Somshbro Pal Chowdhury, partner at Bharat Innovation Fund. Ta. Investors are now exploring new areas such as deep tech and AI, which have more defensible moats, he added.
Funding for startups rose from $462 million in January to $750 million in February and March, data showed, as more domestic investors and small VCs supported early-stage deals. It reached more than $1 million. Abhishek Prasad, Managing Partner, Cornerstone Ventures There will be significant traction.”
Industry insiders say growth deals and late-stage deals are also in the works, but are taking longer to close given investor vigilance. In sectors like quick commerce, where investor appetite is strong, players like Zepto are believed to be in talks for new rounds. Prasad doesn’t expect many down rounds to occur unless a company is in dire need of capital. “There will also be a lot of secondary trading,” he added. “A lot of the funds are reaching the end of their lives in some of the later stage companies.”
