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Indian startups show sign of recovery with $7 Bn funding in H1 2024

EntrackrEntrackr · 12m ago
Indian startups show sign of recovery with $7 Bn funding in H1 2024
Medial

The Indian startup ecosystem is going through a recovery phase: there have been larger funding rounds, an increase in the number of deals, a surge in secondary deals and ESOP buybacks, and a decline in layoffs. As per data compiled by TheKredible, Indian startups raised nearly $7 billion in funding during the first half of 2024. This is more than the $5.92 billion raised in H1 2023. But it’s also far less than $20 billion in H1 2022 which now seems like the golden phase for startups, at least in terms of venture capital inflow. The $7 billion funding consisted of 182 growth or late stage deals worth $5.4 billion and 404 early-stage deals worth $1.54 billion. Meanwhile, 99 were undisclosed deals. During the first half, Indian startups produced a couple of unicorns: Perfios and Krutrim SI Designs. In 2023, only two startups managed to go past the unicorn valuation while 2022 and 2021 saw the emergence of 26 and 44 unicorns, respectively. [Y-o-Y and M-o-M trend] As mentioned above, there is a significant increase in the number of startup deals and funding in H1 2024 from $5.92 billion in H1 2023. If we see the last four consecutive half yearly data, H1 2024 stands at the top in terms of total amount raised. The growth can be attributed to a bunch of $100 million plus rounds and mega deals bagged by late stage firms such as Zepto, Flipkart, PharmEasy and Lenskart. When it comes to month-on-month trends, June saw nearly $2 billion in funding which is more than double of the average of $1 billion monthly funding until May this year. [Top 10 growth stage deals in H1] Late stage companies such as Zepto, Flipkart, PharmEasy and Lenskart were on the top with $665 million, $350 million, $216 million, and $200 million funding, respectively. Lenskart’s $200 million funding was a pure secondary transaction play whereas Zepto may have also had some secondary component in the last funding round. Overall, all startups in the top 10 list have raised more than $100 million each during the first six months of 2024. The list includes Engrail, Atlan, Pocket FM, Nephroplus, SEDEMAC and Shadowfax. [Top 10 early stage deals in H1] Invite-only networking platform SCOPE led the funding chart for early stage startups with $90 million funding. This was followed by AI startup Krutrim, blockchain startup Avail, e-commerce startup Indkal and battery tech startup IBC. Lyskraft, Ema, StockGro, Hunch and Rozana also made it to the top 10 list of early stage deals. Notably, more than 30 early stage startups have raised over $10 million each during H1 2024. [Mergers and Acquisitions] The first half of 2024 saw 55 mergers and acquisitions, which is lower when compared to the previous years. The year 2021 saw more than 250 mergers and acquisitions which declined to 204 in 2022 and further reduced to 145 in 2023. Even if we double the number of M&A, it will hover around 100 in total by the end of 2024. There were stress deals during the period which included the acquisition of ZestMoney by DMI Group, MX Player by Amazon, Kuvera by CRED, Spartan Poker by OneVerse, and ET Money by 360 One (formerly IIFL Wealth). Check the list for more details: [City and segment wise deals] Bengaluru, once again topped the list with 253 startups from the city having raised more than $2.83 billion in funding during 2023. This accounted for 40% of the total funding. Delhi-NCR-based startups followed with 164 deals amounting to $1.3 billion. Mumbai, Hyderabad and Pune made it to the top five list. Notably, Mumbai-based startups contributed to nearly 22% of the total funding whereas Delhi NCR-based startups accounted for 18.76% of the overall fund inflow. Segment wise, e-commerce was at the top with 124 startups raising over $1.87 billion. Fintech, healthtech, SaaS and EV startups were next on the list. Amount wise, EV startups raised more money than SaaS and healthtech. Agritech, foodtech, edtech and proptech saw their downfall during the first half of 2024. [Stage wise deals] In H1 2024, seed and pre-seed stage startups saw 266 deals amounting to more than $457 million. Series A and pre Series A saw 134 and 80 deals, respectively. There were 58 debt funding worth $784 million and 5 pre-IPO rounds worth nearly $250 million. Check TheKredible for more details. [Layoffs, shutdowns and departures] Layoffs, shutdowns and departures continued even in 2024. However, there was a sharp decline when compared with the previous years. For context, Indian startups saw 3,300 people being laid off during H1 2024 which is roughly one-third of the over 9,000 in H2 2023 and 15,000 in H1 2023. Byju’s, ReshaMandi, Swiggy, Ola, Cult.fit, Healthifyme, Scaler and PrepLadder topped in terms of laying off employees during the first half. During the first quarter of 2024, five companies shut their operations. The list includes Resso, Rario, OKX India, GoldPe, and Muvin. Rario added that it will launch a brand new platform that will enable users to play new and engaging cricket-based games. However, only one startup announced its shutdown during the second quarter taking the overall shutdown to six in H1. In 2023, more than 15 startups shut their operations. High profile departures were a big concern during the first half of 2024. As per data compiled by TheKredible, 45 top level executives left their posts. These include co-founders, CEOs, CFO, CBO, COO, and managing directors, among others. [Comparison] For a better understanding of startup funding, we have created a comparison graph for the first and second quarter of the year which showed that the number of deals and total funding saw an uptick in Q2 when compared to Q1. [Trends in H1 2024] Surge in generative AI and spiritual tech deals: Overall, AI startups saw 27 deals amounting to $237 million. Generative AI startups grabbed a significant portion of the total funding. In the past six months, these startups have managed to mope up nearly $100 million. The list includes Sarvam AI, Ema, Neysa, Vodex, and KonProz, among others. Spiritual tech startups also saw an uptick in the number of deals. In the ongoing calendar year, such startups have raised more than $36 million and some new rounds are in the pipeline. Maiden funding for established fashion brands: During H1, a clutch of fashion and apparel brands raised their maiden institutional round. In May, A91 Partners led a $21 million round in TechnoSport whereas Libas raised $18 million led by ICICI Venture’s fund. Recently, Rare Rabbit raised $18 million in primary capital led by A91 Partners. The round is expected to close at around $50 million. ESOP and secondary deals: More than 10 startups announced their ESOP buyback program worth nearly $58 million in H1 2024. While the majority of them did not disclose the amount, Meesho, Urban Company and Pocket FM announced their largest ESOP buyback program. Similarly, secondary transactions have also increased during the first six months. Some of the biggest beneficiaries of secondary transactions are Lenskart, Meesho, Shadowfax, Fibe, Wow! Momo, Porter, among others. Startup IPOs on the rise: In the ongoing calendar year, TBO tech, Digit Insurance, Awfis and Ixigo have been listed on the stock exchanges while Unicommerce, FirstCry and Ola Electric got final approval from SEBI and Mobikwik, Swiggy and Avanse have been waiting for approval from the market regulator. Overall, 2024 appears to have better prospects for startups in the public market. In 2021, more than 10 startups listed on stock exchanges. This number plummeted in 2022 (two IPOs) and 2023 (five IPOs). Moreover, a bunch of companies are assessing the right time to launch their IPO, Zepto, Flipkart, PharmEasy, The Good Glamm Group, and others may announce their exact IPO timeline anytime soon. Debt deals: Besides increase in equity and secondary deals, debt deals also contributed a significant portion in H1. As per data, H1 2024 saw 57 debt only deals amounting to $784 million. There were several deals which included equity as well as debt components. However, we couldn’t ascertain the actual breakdown of such deals which may push the overall debt to more than $1 billion in the said period. [Conclusion] While the peaks of H1 2022 might take some time to be reached and crossed again, considering the typical cycle of at least 3-5 years for such funding peaks, things are certainly improving fast. While stability in government helps, it is the booming stock markets that will drive funding for startups too, as investors cash out gains and redeploy from successful IPOs or broader market gains. Ironically, many firms that could barely get VC or PE funding have managed IPOs in recent weeks, further underscoring the case for a correction in the stock markets or a diffusion of the bullishness to startup funding as well. But while the markets will continue to value revenues and some profitability ideally, the real job of backing ideas and innovations will also benefit as multiple VCs, family offices and other investors return to the startup funding market to seed the next crop of startups.

Related News

Indian startups attract $4 Bn in funding during September quarter

EntrackrEntrackr · 9m ago
Indian startups attract $4 Bn in funding during September quarter
Medial

Indian startups have shown impressive resilience in the third quarter of 2024, raising over $4 billion. This funding amount is nearly on par with the previous quarter and exceeds the total from the first quarter of the year. The landscape featured several significant deals, including multiple transactions over $300 million and $200 million, along with pre-IPO rounds and secondary market activity. This robust support, especially from early-stage startups, highlights a strong recovery and continued investor confidence, making it one of the most successful quarters during the ongoing funding winter. According to data compiled by TheKredible, Indian startups raised approximately $4.08 billion in funding during the third quarter of 2024. This amount included 85 growth and late-stage deals totaling $3.3 billion, along with 207 early-stage deals worth $754.26 million. Additionally, there were 58 undisclosed deals during this period. Notably, three new unicorns emerged in Q3: Ather, Rapido, and Moneyview. In total, six startups joined the unicorn club in 2024, all based in Bengaluru. In contrast, only two startups reached unicorn status in 2023, while 26 and 44 unicorns were born in 2022 and 2021, respectively. [Y-o-Y and M-o-M trend] In Q3 2024, Indian startups secured 352 deals totaling $4.08 billion, a slight decrease from the $4.27 billion raised across 363 deals in the previous quarter. Over the last seven quarters, Q3 2024 stands out as the second most funded period. Additionally, on a monthly basis, September achieved the second-highest funding with $1.63 billion, trailing behind the peak of $1.92 billion recorded in June. As of now, Indian startups have raised $11 billion in the first nine months of 2024, matching the total amount raised throughout 2023. [Top 10 growth stage deals in Q3] This growth can be largely attributed to Zepto’s remarkable $340 million funding round, closely followed by DMI Finance, which raised $334 million. Other significant contributors included PhysicsWallah, Rapido, Oyo, and Whatfix, each securing substantial funding. Notably, all top 10 growth-stage startups on the list have raised over $100 million each, including Purplle, Drip Capital, M2P Fintech, and InMobi. [Top 10 early-stage deals in Q3] Renewable energy services company BluePine led the early-stage startups with $28.8 million in funding. Following closely were AI firm Nutrix AI, EV companies Kinetic Green and Simple Energy, healthcare startup Even, fintech startup Centricity, and gen-z focused fast fashion D2C brand Newme, all of which made it into the top five. The complete list is available through TheKredible. [Mergers and Acquisitions] Merger and acquisition activity has surged to new heights. According to data compiled by TheKredible, Q3 saw 54 M&A deals, nearly matching the combined total of 55 deals in Q1 and Q2. The top acquisition in Q3 was OYO’s purchase of G6 Hospitality for $525 million, followed by Zomato’s acquisition of Paytm’s movies and ticketing business for $244 million. OYO also acquired Checkmyguest for $27.4 million. Other notable M&A activities included Nazara acquiring Pokerbaazi and Kiddopia, Redcliffe Labs acquiring Celara Diagnostics, HomeLane taking over Design Cafe, and Radio Mirchi’s parent company ENIL acquiring Gaana. [City and segment-wise deals] Bengaluru once again led the pack, with 122 startups from the city raising over $1.38 billion in funding during Q3, representing 34% of the total funding. Following closely, Delhi-NCR-based startups completed 91 deals amounting to $1.3 billion, accounting for nearly 32% of the total funding, putting them not far behind Bengaluru. Mumbai, Hyderabad, Chennai, and Pune were next on the list. Notably, Mumbai-based startups contributed to more than 21% of the total funding in the last quarter. Segment-wise, fintech was at the top with 61 startups raising over $1.15 billion. E-commerce, healthtech, SaaS, and AI startups were next on the list. Amount-wise, automotive tech startups raised more money than SaaS and healthtech. Agritech, foodtech, edtech, and proptech saw their downfall during the first half of 2024. Edtech secured $233 million in funding during the period, with PhysicsWallah alone raising $210 million. Agritech was one of the least funded segments, contributing just 1.39% to the total fundraising, while the electric vehicle (EV) sector accounted for nearly 5% of the total. [Stage-wise deals] In Q3 2024, seed and pre-seed stage startups completed 138 deals totaling over $168 million. Series A and pre-Series A rounds recorded 73 and 37 deals, respectively. Additionally, there were 23 debt funding rounds worth $314 million, contributing 7.72% to the overall total. For more details, check TheKredible. [Layoffs, shutdowns and departures] Layoffs continued to impact the ecosystem in Q3, with 10 companies letting go of more than 1,200 employees. However, this figure is significantly lower than the over 2,200 employees dismissed in Q2. Overall, approximately 4,500 employees received pink slips in the first nine months of 2024. In comparison, this year’s layoffs are notably better than the 24,000 layoffs recorded in 2023 and the 20,000 in 2022. Recent market conditions have led to an increase in business closures. In Q3, eight startups announced their shutdowns, including Koo, Wynk Music, and Greenikk. This figure surpasses the six shutdowns recorded in Q1 and Q2 combined. Meanwhile, the startup ecosystem experienced notable departures of top executives in Q3. According to data, 16 top-level executives, including CEOs, CBOs, CFOs, co-founders, managing directors, and presidents, have resigned. During the period, there were 77 key hirings. The full list can be accessed here. [Trends in Q3 2024] Agritech: Agritech continues to be one of the least funded segments in 2024, with over 30 startups raising only $150 million by September. This trend reflects ongoing challenges, as last year saw just $178 million in agritech funding, a significant drop from $772 million in 2022 and $636 million in 2021. Wealthtech: Wealthtech is witnessing rapid growth, with venture capitalists making significant investments over the past 12 months. According to data intelligence platform TheKredible, Indian wealthtech startups raised over $100 million across five deals in Q3. IPOs from Bengaluru: Following a wave of startup IPOs from Delhi NCR and Mumbai, Bengaluru is making strides in 2024. Ola Electric and Digit Insurance have already been listed, while Ather and Swiggy have submitted their Draft Red Herring Prospectus (DRHP). Additionally, co-working space startup IndiQube is also planning to launch its IPO soon. BharatPe settles with Ashneer Grover: Fintech company BharatPe has resolved its long-standing dispute with former co-founder and managing director Ashneer Grover. This settlement represents a significant development, particularly given the serious nature of the complaints filed by BharatPe against Grover. Titan Capital launches Indicorns: Titan Capital has introduced Indicorns, a new index that showcases profitable startups generating over Rs 100 crore in revenue. This initiative highlights the growing trend of self-sustaining businesses in India, illustrating that startups can achieve profitability without heavily depending on external funding.

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