After A Difficult 2023, Majority Of Indian Founders Optimistic About Investor Sentiment In 2024

The world’s third-largest startup ecosystem had a tough 2023 as global adverse macroeconomic factors coupled with wary investors and renewed focus on profitability dried up funding for most new-age tech companies. 

As per Inc42 data, funding tanked to pre-2019 levels, with Indian startups managing to raise a meagre $10 Bn in 2023, down 60% from $25 Bn raised in 2022.

The capital drought forced many players to cut corners to extend their runway while others turned to venture debt to fuel their growth story. Names such as Udaan were forced to take down rounds, pointing to hard times facing the ecosystem.

It was this very sentiment that most startup founders echoed in Inc42’s Indian Startup Founder Sentiment Survey, 2023. Of more than 400 founders surveyed by Inc42, 84% conceded that they faced ‘high difficulty’ in raising funds in 2023. 

However, a mere 8% of the surveyed entrepreneurs claimed that they faced a ‘moderate’ amount of hassle in scouring capital. The remaining 8% encountered ‘low’ difficulty in raising funds last year.

Better Times Ahead?

Even as a turbulent 2023 steamrolled funding numbers, most startup founders expect the scenario to change later this year. 

Of the 400-plus founders Inc42 surveyed, 88% said that they anticipate a positive shift in investor sentiment towards Indian startups in 2024. The remaining 12% expect funding winter to loom heavily over the ecosystem this year too. 

Banking on this positive turnaround in sentiment, the majority of the surveyed entrepreneurs, 72%, plan to raise funds In 2024. 

In line with the cyclical nature of India’s economic momentum, Inc42 projects startup funding to increase 36% YoY to hover around the $13.6 Bn mark in 2024. However, unforeseen global issues and other macro factors may lead to a potential 5% reduction in funding this year.

Moving on, most experts and industry stakeholders we spoke with expect forces impeding capital deployment to diminish in the latter half of 2024, setting the stage for a more vibrant investment landscape.

Echoing the sentiment, former managing partner at early stage VC fund Orios Venture Partners, Anup Jain, recently told Inc42 that the homegrown startup ecosystem could easily absorb $25 Bn in funding going forward this year. 

This uptick in funding numbers is expected to percolate across stages. Further, a slew of factors, ranging from renewed focus on profitability to global funds making a beeline for India, will boost the capital infusion into Indian startups. 

On top of that, Indian investors are sitting on the dry powder of more than $18 Bn, which could be unleashed in 2024, paving the way for the revival of the funding numbers and the Indian startup ecosystem. 

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