Funding Slowdown Continues: Indian Startups Record $2 Bn Funding In Q1 2024, A 33% YoY Drop

Even though Indian startup funding zoomed 43% month-on-month in February, there hardly seems any revival on the anvil from the erratic chills of the unending funding winter.    

According to Inc42’s ‘Indian Tech Startup Funding Report Q1 2024’, the overall funding in the world’s third-largest startup ecosystem declined 33% Year-on-Year (YoY) in the first quarter of 2024 (Q1 2024) to $2 Bn, registering a seven-year low.

The number of deals also fell 6% YoY to 214 from 229 in Q1 2023. However, the same was marginally up from 206 deals in Q4 2023. Sequentially, funding slipped 20% from $2.5 Bn in Q4 2023.  

Further, it is pertinent to note that mega deals ($100 Mn and above) have been on a downward trajectory for the past few quarters, with Q1 2024 further adding to Indian founders’ chagrin. 

The quarter under review could only register three mega deals, a 58% decline from seven deals harnessed in the same quarter a year ago. The mega deal count was at its seven-year high in Q1 2022, with 30 startups raking in over $100 Mn.

Now, before we move forward with our key findings of the report, it is imperative to mention that Avanse Financial, PocketFM and Shadofax bagged ($120 Mn), ($103 Mn) and ($100 Mn) in Q1 2024. 

Moving on, late stage funding fell 53% YoY to $0.9 Bn from $1.9 Bn in Q1 2023, growth stage funding fell 13% YOY to $659 Mn, and seed stage funding declined by 21% YoY to $179 Mn.

Ecommerce, Fintech Startups Top Quarterly Funding Charts

Fintech and ecommerce startups continued to woo investors in Q1 2024. While fintech startups secured $460 Mn in 31 deals, ecommerce founders lapped up $336 Mn in 50 deals.

While funding in the fintech ecosystem saw an 11% QoQ increase, ecommerce startups bagged 50% more funding during the quarter user review compared to $224 Mn raised in Q4 2023.

However, on a YoY basis, funding secured during the quarter under review declined approximately 62% from $1.2 Bn raised through 25 deals. Similarly, ecommerce funding during the quarter receded approximately 50% from $633 Mn raised across 40 deals. 

With this, both the sectors maintain their lead in terms of funding acquired in the first quarter of the year. Notable fintech investments during the quarter included Avanse Finance’s mega funding round of $120 Mn and a $80 Mn fundraise by fintech SaaS startup Perfios.

Moving on, enterprise tech startups took the third spot on the podium by raising $305 Mn across 28 deals during the quarter versus $194 Mn raised in 41 deals a year ago.

Meanwhile, with GenAI becoming a rage, it was interesting to observe funding trends in the deeptech sector, which secured $140 Mn across 11 deals in Q1 2024. Some of the top deals in the sector included Lohum Cleantech ($54 Mn), and New Space Research & Technologies ($52 Mn).

Mergers & Acquisitions Saw A Sharp Decline

Consolidation activity in the world’s third-largest startup ecosystem remained in line with Q1 2024 funding trends. The Indian startup ecosystem saw only 15 acquisition deals, registering a 57% YoY decline versus 35 M&A deals in Q1 2023.

Some noteworthy acquisitions were NODWIN Gaming acquiring Comic Con India at INR 55 Cr valuation and Veranda Learning Solutions’ acquisition of a 50% stake in Tapasya Educational Institutions (TEIPL) for INR 120 Cr.

Apart from this, Cred acquired Kuvera and DMI Finance took over Zest Money in a distressed sale.

Overall, the enterprise tech sector took the first spot with four deals — PingSafe by SentinelOne; ClientJoy by Synup; Kyndi by Qlik and Defenz by Signzy.

End Of Funding Winter?

Despite the grim-looking funding situation in the ecosystem, the quarter saw two companies attaining the coveted unicorn title. The latest one to enter the unicorn club was Perfios. The fintech SaaS startup raised $80 Mn earlier this month at a valuation north of $1 Bn. 

In January, Bhavish Aggarwal-led Krutrim became India’s first AI startup to become a unicorn. Netting $50 Mn at a valuation of $1, the startup is also 2024’s first unicorn. 

With Indian investors having dry powder worth more than $18 Bn at their disposal, startup funding could get a boost from the next quarter. Inc42 foresees Indian startup funding to increase approximately 36% YoY this year.

This forecast is based on the average annual growth rate of funding amounts from 2014 to 2023, encompassing the ups and downs of the Indian startup ecosystem over the past nine years.

[Edited by Shishir Parasher]

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