The snow is melting, signalling the arrival of a spring of funding. The upward trend in venture capital funding in the first half of this year is considerable. 45% increase in H2 by 2o23.
There is palpable optimism and also caution as India’s startup funding ecosystem, having demonstrated resilience, moves towards resurgence. What better time than now to hear it directly from those who are busy witnessing the radical changes in India’s startup ecosystem and recalibrating their strategies to reinvent India’s startup funding story? Where are those central to the early-stage startup story shifting their focus, which sectors are they prioritising and what essential behavioural changes have they adopted?
Join Prayank Swaroop, Partner at Accel; Harsha Kumar, Partner at Lightspeed India Partners Advisors; Amit Somani, Managing Partner at Prime Ventures; and Anand Datta, Partner at Nexus Venture Partners, as they discuss funding challenges, decipher investor sentiments, and share forward-thinking solutions in the panel discussion titled, “Rising Investor Interest: Insight and Perspective on the Indian VC Ecosystem Beyond the Hype and Uncertainty.” This introductory panel, to be moderated by Manu P Toms, Senior Editor, Economic Times, will see these leaders of the venture capital ecosystem set the tone for the revamped and redesigned ET Soonicorns Summit 2024, a premier initiative for technology startups by The Economic Times that will return to Bengaluru on September 20, 2024. The theme of its third edition of the summit – the first ticketed version – is ‘From Resilience to Resurgence’ and its core message is an urgent call to Indian startups to ‘Recalibrate. Rebound. Reinvent.’
Having witnessed a startup blossom from the idea stage, these VCs have many exciting stories to share with the ecosystem. Together, they are poised to demystify emerging trends and current funding challenges and outline the vision for future funding, while also delving deeper into funding prospects as the landscape shifts towards a promising future.
The summit aims to chart the future of Indian startups, with goal-oriented discussions designed to identify the loopholes, devise strategies to minimise the damage they tend to inflict, and guide the ecosystem to navigate towards a fruitful funding spring when it comes.
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Trends and roadmap
The challenges that 2023 posed for the Indian startup ecosystem have brought players to maturity, and the VC landscape has witnessed a sea change, raising hopes for 2024 and beyond as funding for the current year is expected to surpass the $10.8 billion figure of 2023.
As investors are restructuring their investment strategies, startups are focused on generating incremental returns, while integrating emerging themes such as artificial intelligence (AI) and sustainability into their arsenal. The shift in focus and strategic recalibrations in the funding ecosystem through 2023-24 offer a glimpse into investor behaviour.
There has been a democratisation of investments in terms of convergence between venture capital (VC) and private equity (PE). PE has focused on fewer but high-value transactions, moving away from its traditional approach of focusing on larger-scale operations.
In contrast, VCs recalibrated their focus on smaller, early-stage deals with the goal of nurturing startups with tremendous growth potential and being in a position to capitalize on the next wave of innovative disruption. The early-stage category recorded 491 deals in the first half of 2024, far higher than any other category where the number of deals remains well below 100.
As foreign VCs pull back, domestic VCs have increasingly focused on sectors such as sustainability and gaming, while consumer tech, fintech, and software and SaaS have remained dominant, receiving over 60% of funding. A slow shift towards generative AI, healthcare, and e-mobility is also something to watch closely.
Funding trends are expected to continue on the same path as spring approaches, and emerging insights will provide better insight for both investors and startups to navigate the landscape intelligently.
The winter of financing, in retrospect
Even transaction volume, as well as average transaction size, took a hit during the funding winter: the number of transactions fell by about 10%. 45%from 1,161 in 2022 to 880 in 2023, and the average transaction size will decrease by approximately 30%, from $16 million to $11 million.
What led to this harsh financial winter? Global caution regarding venture capital, higher interest rates, inflationary pressures and weakening global consumption, coupled with raging wars and a complicated geopolitical situation, created significant uncertainties in the minds of investors.
However, the silver lining was that despite the challenging environment for the startup ecosystem, India outperformed all other countries (except the US, UK and China) in terms of tech funding. India was the second-largest destination for venture and growth capital funding in Asia-Pacific, with sectors such as consumer technology, fintech and software as a service (SaaS) continuing to attract significant investments.
So far, so good
Indian startup funding continues to improve. The 45% increase in VC funding in the first half of 2024 compared to the second half of 2023 needs to be viewed in the light of the long funding winter, which saw a 66% decline in the second half of 2022.
In a major milestone for the ecosystem, funding crossed $1 billion in May and June. The next six months are going to be crucial for the venture capital ecosystem in India, with startups keeping their fingers crossed and investors moving forward with cautious optimism.
Following the success of the previous editions, the summit has gained prominence as the ultimate platform to design outcome-oriented strategies for Indian startups and give them a clearer vision of the future. Apart from analysing the macro trends and micro vision, this year’s summit will empower the ecosystem with the lessons of a rather cold funding winter, enabling them to enter a post-resilience era focused on ease of funding.
This is just a glimpse into the future. This and much more will be discussed at the ET Soonicorns Summit 2024. Don’t miss the opportunity to collaborate, network and foster new ties with industry leaders as they lay out a roadmap for you to follow and get your startup where it needs to be.
Register early as this is an opportunity to learn from change-makers and industry leaders, understand the challenges, and find sustainable strategies to navigate the funding conundrum beyond the hype and uncertainty.
For more information on the ET Soonicorns Summit, visit the site .
To register now, Click here.
(This article is generated and published by the ET Spotlight team. You can contact them at [email protected])
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