Indian Startups Endure Worst May Since 2020; Funding Tanks 34% YoY To $657 Mn

After showing some signs of revival earlier this year, the funding raised by Indian startups again declined in the month of May. Startups raised $657 Mn in May 2024, registering a fall of 34% from $1 Bn bagged in the same month a year ago.

The funding also fell 24% from $868 Mn raised by the Indian startups in April 2024. Overall, last month was the worst May for Indian startups since 2020. 

The deal count, however, rose to 100 in May 2024, up 11% month-on-month (MoM) and 25% year-on-year (YoY).

The funding fatigue in the Indian startup ecosystem was most evident in the first quarter of the calendar year 2024 (Q1 CY24), with homegrown startups seeing a 34% YoY drop in funding to $2 Bn in the March quarter – the lowest in the last seven years.

Growth & Late Stage Investments Drop

Seed stage investments were mostly steady in May 2024, but growth and late stage startups witnessed an alarming decline in funding. 

Seed-stage startups clinched $107 Mn in funding across 50 deals in May 2024, up 2% from nearly $105 Mn raised across 28 deals in the year-ago month. A91 Partners’ $25 Mn investment in activewear brand TechnoSport was among the biggest seed stage deals last month.

Meanwhile, growth stage investments tanked 30% YoY to $216 Mn in May 2024. GreenCell Mobility’s INR 307 Cr (around $36.7 Mn) green financing from Sumitomo Mitsui Banking Corporation (SMBC) was among the biggest rounds.

Late stage startups were the worst hit by the funding squeeze, with investments declining 45% YoY to $298 Mn in May 2024.

Enterprise Tech Sector Continues To Remain Investors’ Darling

The sole bright spot for late stage startups was the enterprise tech startup Atlan’s mega funding deal. The data collaboration software provider bagged $100 Mn in its Series C funding round co-led by Singapore’s sovereign wealth fund GIC and Meritech Capital, with participation from existing investors Salesforce Ventures and Peak XV Partners.

Overall, the startups in the enterprise tech sector cumulatively raised $139 Mn across 14 deals last month. For comparison, the enterprise tech sector attracted investments worth $305 Mn across 21 deals in April. 

Meanwhile, fintech remained the second highest-funded sector, with startups in the space bagging $123 Mn across 17 deals in May.

The real estate tech sector dethroned cleantech to grab the third spot in terms of funding in May. Liquidity Group and Mitsubishi UFJ Financial Group’s MARS Unicorn Fund’s $50 Mn infusion into construction unicorn Infra.Market was the biggest funding round in the real estate tech sector.

Real estate tech startups cumulatively raised $63 Mn in May, thanks to the $50 Mn capital infusion into construction unicorn Infra.Market by Liquidity Group and Mitsubishi UFJ Financial Group’s MARS Unicorn Fund.

Delhi NCR Overtakes Bengaluru To Become Highest-Funded Startup Hub

Interestingly, the funding landscape saw a reversal of trends geographically. Delhi NCR overtook Bengaluru to emerge as the highest-funded startup hub. The National Capital Region (NCR) also led in terms of deal count. 

Startups headquartered in Delhi NCR bagged $260 Mn in funding across 28 deals. In fact, Bengaluru fell to the third spot from April’s top position, as Mumbai jumped three spots from April to take the second place last month.

Startups in the country’s financial capital raised a cumulative $134 Mn across 24 deals, while those headquartered in the country’s Silicon Valley attracted investments worth $115 Mn across 14 deals.

Meanwhile, Chennai dropped below Hyderabad to the fifth spot. Hyderabad-based startups raised $56 Mn across seven deals in May. Investors only made three bets on Chennai-based startups worth $32 Mn.

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