After the frenzy of billion-dollar valuation, 2023 delivered a sobering blow to the startup ecosystem. Several startups shuttered, many faced funding droughts and others rolled back their IPO plans because of unfavourable market conditions.
What’s Wrong?
The key takeaway? Over-reliance on bloated valuations would not ensure long-term viability. BlackRock slashes Byju’s valuation by 95% to $1 billion, Pine Labs and Swiggy face valuation cuts by US-based investor Invesco and other such cases are lessons.
This market correction forced founders to shift their focus towards resilience, profitability and sustainability. Consequently, 2024 has witnessed fewer unicorns. However, a more measured approach from entrepreneurs now attuned to the importance of building solid, value-driven businesses rather than chasing quick capital and inflated valuations.
Silver Lining
In 2024, unicorns like Porter, Rapido and Krutrim demonstrated that a robust growth strategy can triumph over adverse market conditions. Moreover, a key constant is that startups with sound fundamentals and no operational flaws continue to attract investor interest. Companies such as Lenskart (Rs 1,640 Cr in June), Puplle Group (Rs 1000 Cr in June), Oyo (Rs 1,457 Cr in Series G) and others draw big-ticket funding in 2024 exemplifying how operational excellence can weather funding winter.
India’s Upward Graph
According to the latest GlobalData report, Indian startups raised $6.3 billion across 672 venture capital (VC) deals between January and July 2024 which is a 42% year-on-year increase in funding. This growth occurred despite a cautious global investment environment, which saw a minimal 1.2 per cent increase in deal volume, reflecting investor confidence in India's potential.
In 2023 during the same period, in comparison, India secured 664 VC deals with a disclosed funding value of $4.4 billion, as per the data. Key deals in 2024 included Zepto's $665 million funding round, Meesho raising $300 million and PharmEasy securing $216 million.
Archana Jahagirdar, Founder and Managing Partner, Rukam Capital hints, “India’s undercapitalisation presents a huge opportunity for venture capitalists and investors since it indicates substantial growth potential, unlike mature and saturated markets like the United States or Europe.”
Furthermore, citing the major driver of this growth she explains, “The acceleration of digital infrastructure, the convergence of a youthful demographic, increased internet penetration, and rising disposable incomes have created a fertile ground for innovation. As global supply chains diversify away from China, India is emerging as a critical player in manufacturing and technology as well.”
Golden Bet For Investment
With recent two big long-overdue announcements, the removal of angel tax and parity on tax are set to significantly boost investor confidence, fostering greater capital inflows into homegrown startups.
Ankit Kedia, Founder and Lead Investor, Capital A emphasises, “Central to India's startup boom is strong government backing. Recognising startups as engines of economic growth and job creation, the Indian government has introduced initiatives to foster a supportive environment for entrepreneurs.”
Speaking about the road ahead, Akshay Mehrotra, Co-founder and CEO, Fibe believes that while fintech and ecommerce are witnessing significant disruption today, the future will see even greater changes in the healthcare sector. He predicts that companies emerging in the past 15 years will drive 50% of the Indian economy. Mehrotra also anticipates a market evolution where comprehensive cash flow allowances for startup investors and entrepreneurs will become standard.
Bhavik Vasa, Founder and CEO, GetVantage asserts, "India is set to see over 100 domestic brands making their mark on the global stage. Having already demonstrated technology disruption through the India Stack and introduced UPI to the world, India is poised to revolutionise digital financing with OCEN (Open credit enablement network). Additionally, in the next 5 to 7 years, India is expected to emerge as the most buzzing public market.”
The Impact Of IPO Wave
In 2024, the IPO landscape has become a defining benchmark for startup success. Prominent listings from high-profile startups such as Mamearth, Unicommerce, FirstCry and Ola Electric have set a new standard. This renewed focus on IPOs reflects a broader trend where startups are increasingly prioritising profitability over mere unicorn status, signalling a mature shift within the ecosystem
The outlook for the Indian market is optimistic, with projections indicating over a hundred IPOs in the coming five years. Veteran investors and industry leaders are optimistic that India is poised to lead on the global stage and positions India to close the year on a high note.
