NEW DELHI, Dec 31: The Indian startup sector had a tumultuous journey in 2024, marked by a slight yet worrying drop in funding and a shift in investor attitudes, while still celebrating the achievement of multiple startups reaching unicorn status.
In spite of facing worldwide economic difficulties, Indian startups demonstrated outstanding resilience, skillfully adapting to evolving market conditions while still managing to attract considerable investments.
As per data from Tracxn, Indian startups secured a total of USD 30.4 billion in funding during 2024, reflecting a 6.5 percent decrease from the USD 32.5 billion received in 2023.
Even with this downturn, the Indian startup ecosystem showed notable resilience, welcoming several new members into the unicorn club this year. Key new unicorns include Rapido, Ather, Perfios, Porter, and Money View, showcasing continued innovation and sustained investor interest in the sector.
The overall funding landscape indicates a cautious but hopeful stance among investors as they navigate a more discerning investment climate while acknowledging the potential of high-growth startups in India.
A slight pivot towards early-stage investments was apparent throughout the year, with seed and Series A funding gaining traction as investors looked to support innovative concepts with long-term viability.
Firms demonstrating strong underlying unit economics received more attention this year, as noted by Dushyant Singh, Managing Partner at Playbook Partners.
The gig economy, retail, and enterprise applications emerged as leading sectors, according to Tracxn.
Quick commerce also saw significant growth, featuring 40 active companies, including the unicorns Zepto, Blinkit, and Swiggy Instamart, alongside promising entrants like Dunzo, Swish, and Farmako.
In July, the government announced the elimination of the angel tax on startup investments, creating a more favorable growth environment.
“The abolishment of this tax has offered a vital boost to both investors and entrepreneurs, allowing for greater liquidity and enhanced funding flexibility for startups. However, the challenges of fewer funding rounds, high operational costs, and infrastructural issues remain significant concerns,” stated Jeenendra Bhandari, Chairman of the JITO Incubation and Innovation Foundation (JIIF).
There was a notable increase in female entrepreneurs and founders emerging from Tier 2 and Tier 3 towns. Ninad Karpe from 100X.VC highlighted that the entrepreneurial spirit has expanded beyond its conventional boundaries.
“This entrepreneurial dynamic has permeated colleges, schools, and even Tier 2 and 3 locations. Founders from these areas are bringing new insights, tackling hyperlocal challenges, and generating previously untapped opportunities.
“We are witnessing a marked increase in women entrepreneurs, which is a positive development for inclusivity and diversity within the startup ecosystem,” he remarked.
According to official statistics, India boasts over 73,000 startups with at least one woman director recognized under the Startup India Initiative.
Despite these positive shifts, challenges remain.
Global economic uncertainties directly influence investor sentiment and funding availability.
“While the volume of deals has increased quarterly by 10-20 percent… the value of these deals has seen a significant decline. This indicates a careful investment environment, with many funding rounds being follow-ons from current investors or bridge rounds aimed at extending the operational runway instead of driving growth. The emphasis has shifted from valuation-driven funding to sustainability and profitability,” stated FAAD Capital CEO Aditya Arora.
The decline in funding is also attributed to the rise in operational costs, which have put strains on financial sustainability despite some Indian startups achieving unicorn status without turning a profit.
Many startups still confront issues related to insufficient physical infrastructure, particularly in Tier 2 and Tier 3 cities. This inadequacy dramatically affects logistics, supply chains, and overall operational effectiveness.
Furthermore, tackling compliance requirements can prove burdensome for new enterprises, diverting focus away from innovation and expansion.
A fitting adage for the current state of the Indian startup landscape could be: “In the face of hardship, hope becomes the seed from which resilience flourishes.”
Despite experiencing a rough stretch in recent years, the Indian startup scene has exhibited remarkable resilience.
The increasing trend of Indians returning from overseas to launch businesses is also anticipated to breathe new life into the ecosystem with international expertise, Bhandari believes.
A sense of cautious optimism in 2024 is likely to carry into 2025; however, a broader market recovery may still be a couple of years away, with considerable enhancements expected by 2026, according to Arora.
“In the meantime, the ecosystem is projected to see a surge in SME IPOs, unlocking genuine value for both investors and startups,” he added.
The emergence of artificial intelligence, machine learning, and blockchain technologies is set to draw in substantial investment. Startups utilizing these technologies are expected to lead funding discussions.
Deloitte’s Chirag Agrawal highlighted that AI is facilitating efficient operations and aiding data-driven decision-making.
AI-centric startups are receiving significant investments, especially in impactful sectors like healthcare, finance, and sustainability, he noted.
“For 2025, India’s entrepreneurial ecosystem is on track for sustained growth, propelled by technological advancements, government reforms, and a supportive macroeconomic landscape.
“Emerging trends point to significant investments in Deep Tech, Electric Vehicles, Clean Tech, Defence Tech, and Space Tech. These fields are poised to draw considerable funding, particularly in AI, sustainable technologies, and space commercialization, positioning India as a global leader in these high-potential domains,” he stated. (PTI)
