Bengaluru: Investments in start-ups in India in the ongoing October to December quarter have, so far, been the lowest in three years, owing to cautious investor sentiment globally and other macroeconomic factors, indicative of a fast-setting funding winter and difficult times ahead for home-grown companies looking for much-needed funds, according to a new report.
That said, India saw the third-highest investments into start-ups across the world, albeit coming in far behind the US, which cornered the vast majority of start-up funding globally.
Though India saw its funding numbers rise a modest 6 percent in calendar year 2024 (CY2024) when compared to last year, the overall decline since CY2021 appears to be a matter of concern for Indian companies looking for investment inflows.
From $37.2 billion raised in CY2021, India saw start-up funding plummet to $25.4 billion in CY2022 and further to $10.7 billion in CY2023, followed by a modest 6 percent increase to $11.3 billion in CY2024, according to the report.
But this was just 5 percent of all global funding in the year. Start-ups in the US bagged 62 percent or $144 billion of all funding, and those in the UK came a distant second, raking in $13.4 billion.
And most of this funding has gone into unicorns (start-ups valued at over $1 billion) as against new companies that are looking to raise funds.
Inflows into first-time funded companies were down 40 percent in 2024 as just 393 early-stage companies raised investments this year as against 655 last year.
“While funding patterns have evolved towards fewer, larger rounds, the emergence of six unicorns, significant IPO activity, and sectoral growth in gig economy, retail and enterprise applications demonstrate the ecosystem’s ability to adapt and innovate amid global challenges, making India an international hub for entrepreneurial excellence and innovation,” Neha Singh, co-founder of Tracxn, said.
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Mumbai-headquartered Zepto raised $665 million in a Series F round led by Lightspeed Venture Partners and others, while Chennai-based TI Clean Mobility has raised a total of $359.29 million in a Series D round. Bengaluru-based e-commerce giant Flipkart raised a total of $350 million in a Series J round led by Google, valuing the company at over $36 billion.
However, a steady decline in inflows into seed-stage start-ups added to concerns.
In 2024, only six Indian start-ups made it to the coveted unicorn club out of the 86 globally and 50 in the US alone. This is higher than two new unicorns in 2023 but significantly lower than 24 in 2022, as investors hedge their bets on large and well-established companies while leaving out funding requirements of seed-stage start-ups.
“Seed-stage saw a total funding of $0.97 billion in 2024, a drop of 22.43 percent compared to $1.25 billion raised in 2023, and a drop of 48.19 percent compared to $1.87 billion raised in 2022,” according to Tracxn.
There was a marginal increase of 2.09 percent in early-stage funding at $3.16 billion in 2024 when compared to $3.09 billion in 2023. But this year’s number saw a 54.39 percent decrease in early-stage funding when compared to 2022 when this segment had raised $6.93 billion.
The US bagged 3,160 rounds of Series A+ funding out of the total 6,627 globally while India managed to rake in just 523 such rounds.
Globally, India saw just 1,448 funding rounds (all categories) in 2024 as against 2,114 rounds in 2023, registering a de-growth of 31 percent.
Most major metros, including Bengaluru, raked in the highest amount of venture capital (VC) funds but registered a decline when compared to last year. However, cities like Hyderabad, Noida, Jaipur and Kolkata saw a sharp uptick in percentage of growth.
Investments in Hyderabad in 2024 stood at $555 million as against $189 million in 2023. Noida more than doubled VC fund inflows as it raked in $518 million this year against $258 million in 2023.
Bengaluru’s VC fund inflows saw a decline from $4.8 billion in 2023 to $3.4 billion in 2024.
But the gig economy registered an astronomical rise in funding, clocking in 414 percent increase in funding from $420 million in 2023 to $2.2 billion in 2024.
“Karnataka is home to 18,000 start-ups, 45 unicorns and 38 percent of India’s 435 soon-to-be unicorns. The remarkable growth stems from a thriving ecosystem, entrepreneurial spirit, and strong industry-government collaboration, placing Karnataka in 4th position globally in innovation ecosystems,” Priyank Kharge, Karnataka’s minister for IT/BT, said on X Tuesday.
Bengaluru saw 431 rounds of funding, which helped the city remain ahead of all other major metros in India, mostly through advanced rounds of funding like Flipkart’s $350 million in May, Meesho’s $275 million and mobility service provider Rapido’s $200 million.
Mumbai, Delhi, Gurugram, Chennai and Pune were among those that registered negative funding growth, data shows.
There were also a higher number of companies going public, which is likely to have reduced funding rounds into bigger start-ups.
In 2024, India saw 37 IPOs, or 76.19 percent higher than 21 in 2023, and 19 in 2022.
The retail sector attracted $2.6 billion funding but this was a 13 percent decline compared to $3 billion raised last year.
Funding into enterprise applications dropped 11 percent from $2.5 billion in 2023 to $2.2 billion in 2024.
(Edited by Nida Fatima Siddiqui)
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