After a prolonged slump in late-stage investments among Indian startups, large funding rounds valued at over $100 million are witnessing a resurgence in 2024. Investors are increasingly placing their bets on companies demonstrating growth with a clear path to profitability.
In the year 2024, till September 2024, $10.5 billion has been raised in 1,300 equity funding rounds across India, according to Traxcn data.
In the same period last year (i.e. till September 2023), $14.5 billion had been raised across 1,910 rounds in India. So, 2024 has seen a 27.97% drop in funding in companies of India as compared to 2023.
So far this year, 13 funding rounds exceeding $100 million have been recorded, including those by Zepto, Rapido, Lenskart, Flipkart, Meesho, and Pharmeasy. Although this is lower than the 14 such rounds during the same period in 2023, the average deal size in 2024 has been larger. Startups have collectively raised $3.3 billion year-to-date (YTD) across these 13 rounds, compared to $3 billion from more rounds in the previous year.
The frequency of large deals is also on the rise. The number of $100+ million rounds has increased sequentially, from three deals in the fourth quarter (Q4) of 2023 to four in Q1 2024, and five in Q2.
The triggers
India-focused venture capital players are currently sitting on significant amounts of unallocated capital, known as dry powder, which is ready to be deployed. This is playing a key role in the resurgence of late-stage funding. Additionally, there is a renewed focus on profitable growth for late-stage ventures, driving many startups towards exploring public markets. Recent successful IPOs of new-age companies have bolstered investor confidence in these late-stage ventures.
Macroeconomic factors, including India’s strong economic growth projections, are further fueling investor optimism. Many investors are increasingly backing companies that display robust growth trajectories and a clear path to profitability.
The resurgence comes after a challenging period for large funding rounds in India, which had been severely impacted by the so-called funding winter. In 2023, startup funding dropped to a seven-year low, falling 72 percent year-on-year to $7 billion from $25 billion in 2022, according to Tracxn.
Late-stage rounds, which contribute the largest share to the total quantum of startup funding, were among the hardest hit during the funding winter. However, with the recent uptick in big-ticket deals, late-stage funding is showing signs of recovery.
Unlike the pre-funding winter period, where a fear of missing out (FOMO) often drove large rounds with quick funding and limited diligence, the current investment climate is marked by more robust due diligence and more rational valuations.
While capital deployment may not return to the frenzied pace of a few years ago, investors anticipate that large deals will continue to materialize in the coming quarters.
