At the Inc42 MoneyX conclave last year, several industry leaders and veterans declared the end of the funding winter when founders were crying havoc due to a paucity of funds.
While Sanjeev Bikhchandani of Info Edge was quite firm in his standing that there was no funding winter, Rajan Anandan of Peak XV Partners highlighted that the VC firm was sitting on dry powder exceeding $2.34 Bn (INR 20,000 Cr).
We understand that their optimism stemmed from the fact that there were many ventures worthy of funding and founders focussed on building fundamentally strong ventures versus cash-guzzling entities.
Close on the heels of the event, weekly funding fell with a thud. Notably, the numbers first tanked from $200 Mn (between July 17 and July 22) to $42 Mn (between July 24 and July 29). Imperative to mention that these funding figures are among the lowest since Inc42 reported weekly funding in January 2023, amid a global macroeconomic uncertainty.
This begs to be asked — Is the situation any better this year?
Well, according to Inc42’s ‘Annual Funding Report 2024’, homegrown startups cumulatively netted more than $12 Bn in fresh funds during the year, up over 20% from the $10 Bn raised in 2023. The year so far (as of December 21, 2024) has also seen as many as 993 deals materialise, about 11% more than 2023.
With this, while the fresh funds raised by startups this year remained abreast of the year 2020, the onset of the funding blitz, the deal count was marginally up (startups raised $12 Bn+ in 953 deals in the whole of 2020).
However, funding and deal count were still a far cry from the $42 Bn raised across 1,584 deals in 2021. Not to mention, the fresh funding raised by startups was nearly half of what startups raised in 2022 ($25 Bn across 1,517 deals).
While we have seen an increment in capital raised by new-age tech companies through private funding rounds on a year-on-year basis, it is also pertinent to mention that the funds raised by many such companies via public listings were at an all-time high this year.
In 2024, 13 new-age tech companies like Swiggy, MobiKwik, and Awfis, among others, raised fresh capital via an initial public offering. Meanwhile, listed Zomato, Nazara, Zaggle, and Veefin raised additional capital from the markets this year.
Healthy Funding Uptick Across All Stages
Besides the startup IPO boom, the world’s third-largest startup ecosystem witnessed a 3X YoY rise in startups entering the coveted unicorn club. Six startups — Rapido, Perfios, Moneyview, Ola Krutrim, Ather and Rategain — entered the unicorn club in 2024 versus only two, Zepto and InCred, last year.
The aforementioned startups picked up fresh funds at a valuation north of $1 Bn in 2024, excluding listed SaaS company Rategain, whose market cap crossed the $1 Bn mark this year. Its market capitalisation now stands at $981.80 Mn.
Besides, there were other startups whose valuations hovered close to the unicorn mark. Twenty-four late-stage startups raised mega-funding rounds this year versus 23 in 2023.
What is interesting here is the fact that even though the mega-funding rounds are on par with last year, the Indian startup ecosystem has witnessed a surge in total funding by more than $2 Bn.
The Indian startup ecosystem seems to have hit a paradox of sorts this year, as many experts believe that the mega-deal metric often acts as a periscope to glare into the yearly funding trends. For instance, with 109 mega deals, total funding in 2021 stood at $42 Bn. These funding rounds accounted for 67% of the total funding in the year. Similarly, the total funding in 2022 was at $25 Bn+ with 60 mega deals.
However, one must also not forget that these years bagged the most startup funding on the back of investor FOMO during the peak of the Covid-19 pandemic.
Moving on, the late-stage funding zoomed 25% to over $7 Bn in 150 deals (up 81%) this year. Besides, the number of deals went up by over 81% from last year. A similar uptick was seen across all stages.
Startups at the growth stage raised $3.5 Bn via 282 deals in 2024 versus $2.9 Bn across 192 deals in the preceding year.
The biggest increase this year in terms of raising fresh capital was at the seed stage. Early-stage startups cumulatively raised $893 Mn (up 31% YoY) via 433 deals.
According to 3one4 Capital’s founder Pranav Pai, the uptick in early-stage funding is the result of tepid or more cautious investors, who raised in 2021 & 2022 but are now in the process of deploying the capital in startups.
“They aren’t outrightly optimistic and hence making smaller investments,” Pai said.
Another reason for the revival of early-stage funding has been the advent of GenAI and its adoption in new and emerging businesses. Think AI startups like Jhana.ai, Pulse, and Pintel.ai, which bagged funding within just one year of inception.
However, the number of early-stage deals slipped by 7%, likely because the median ticket size of early-stage funding witnessed a 23% YoY increase to $2.7 Mn versus $2.2 Mn in 2023.
Fintech Investor’s Favourite Sector
With over $2.5 Bn raised across 162 deals, fintech continued to lead the investment roost at the sectoral level this year. However, the total funding funds slipped 17% from the $3 Bn secured across 129 deals last year.
Meanwhile, enterprise tech and consumer services sectors share the second spot, with each raising $1.8 Bn in 2024. However, the deal count stood at 167 and 48 deals, respectively. The boost in consumer services’ funding came on the back of quick commerce major Zepto raising $1.3 Bn in three tranches this year.
Notably, both sectors have seen a spike in yearly funding. While the enterprise tech startups across stages had raised a total of $1.3 Bn across 157 deals last year, new-age consumer services ventures had to make do with a mere $385 Mn fresh capital raised across 39 deals.
On the contrary, ecommerce funding tanked 42%, to $1.5 Bn from $2.6 Bn raised in 2023, on the back of a diminishing investor interest this year. However, at 203 deals, the Indian ecommerce sector shone brighter than the rest.
Moving on, the Indian cleantech chapter retained its fourth spot with $829 Mn raised across 75 deals in 2024. Interestingly, healthtech outran deeptech to clinch the fifth spot with $716 Mn funding across 78 deals. The Indian deeptech sector was seen making merry with a fresh capital infusion of $460 Mn in 78 deals.
Pertinent to note that healthtech has traditionally been a sector with limited investor interest. According to an Inc42 report, Indian healthtech startups raised a little over $7 Bn between 2014 and H1 2024 in 886 deals. Investors believe that the spurt in healthtech funding this year was due to increased AI adoption among startups.
“The year so far has been a year of exploration and recalibration for healthcare innovation, especially in the realm of AI. While generative AI and large language models sparked significant buzz globally, their tangible impact on Indian healthcare remained limited as companies continued to navigate their applicability,” Namit Chugh, Principal, W Health Ventures, said.
Zepto Makes Mumbai The Most-Funded Startup Hub Of 2024
This year, India’s financial capital Mumbai overthrew Bengaluru’s dominion as India’s most-funded startup hub. With $3.67 Bn raised across 175 deals during the year, the region surpassed Bengaluru by $24 Mn. But there is a slight twist in the Mumbai story.
Mumbai became India’s most-funded startup hub on the back of Zepto, which raised $1.3 Bn during the year. However, Zepto relocated its headquarters from Mumbai to Bengaluru in August this year. To maintain data consistency, it made sense to put the quick-commerce platform’s funding in Mumbai’s kitty.
Now, if we omit Zepto from the Mumbai equation, Bengaluru is the clear winner at $3.43 Bn raised in 285 deals. Last year, India’s Silicon Valley raised $4.2 Bn in total startup funding across 249 deals.
Meanwhile, startups based in Delhi NCR raised $2.3 Bn across 252 deals. A silver lining for the national capital’s startup ecosystem was its growing contribution in the startup IPO space. At the end of the year, the city was home to the 14 listed new-age tech startups, miles ahead of Mumbai and Bengaluru.
What’s In Store For 2025?
Moving forward, investors expect the pace of global startup funding in 2025 to accelerate meaningfully, amid stabilising geopolitics and volatility in global markets, and improving confidence due to lucrative returns.
Besides, Pai expects a measured but clear rebound in Indian private markets on the back of a resurgence in the global startup ecosystem.
This resurgence, he said, would be supported by the strong economic fundamentals India has cultivated, a steady GDP growth, a vibrant consumer market, and proactive policies that back innovation.
“Lessons learned from the recent correction have led both founders and investors to moderate expectations and adhere to guidance discipline. This approach is clearly getting rewarded in India’s public markets as well. The result will be a healthier support for genuine innovation and the delivery of enduring value,” he said.
While that is for time to tell, the year so far has been a period of cautious optimism for India’s startup ecosystem. While the funding landscape showed signs of recovery with an increase in overall investments and deal counts, the numbers remain far from the highs of 2021 and 2022. Further, a rise in early-stage funding and the IPO boom indicate a shift towards building sustainable, fundamentally strong businesses.
Now as we stand on the precipice of 2025, the stage is set for measured growth driven by resilient economic fundamentals, supportive policies, and a recalibrated approach by founders and investors alike. With the lessons of the funding winter in mind, the Indian startup ecosystem ought to balance innovation with value creation going ahead.
[Edited By Shishir Parasher]
