By most accounts, 2024 has been quite a good year for the Indian market, but was it legit?
The stock market survived a crash and is now up some 9%. GDP growth has held strong despite tapering slightly towards the end. And a record $19 billion plus was raised on local bourses through IPOs.
Poster child Zepto raised more than $1.3 billion in funding rounds, while Swiggy matched that figure in its public offering in November. In total, at least 21 startups closed > $100 million in funding.
But it’s not that rosy if you peer deeper. Private market investment, in fact, dipped.
Venture capital and private-equity investors poured just $17 billion into startups, compared to $18.3 billion in 2023, according to data from investment tracker Tracxn. In fact, between 2020 and 2022, $43.3 billion was invested on average each year.
Hold your horses… (or unicorns)
Why the dip? Investors have grown cautious because of high startup valuations, election-related uncertainty and a general spillover of a tech winter from Silicon Valley, according to VCs and entrepreneurs interviewed by MONIIFY.
VC firms like Tiger and Softbank have largely stayed out this year, while Peak XV (formerly Sequoia Capital India & Southeast Asia) reduced some fund targets, indicating limited opportunities. In fact, many large investors cashed out in IPOs and through secondary deals.
The current downtrend should ideally be seen in the context of the last few years.
Read more: How to navigate Southeast Asia’s tech jobs downturn
India has been on a remarkable multi-year bull run. Markets hit record levels before a recent decline, and the economy leads peers on growth. The 2020-21 peak saw massive deals like Reliance Jio’s $15 billion and Flipkart’s $3.6 billion raises.
India now ranks third globally with more than 100 unicorns.
It’s a “cleansing” of the 2020-21 tourist VCs who, “lured by the uptrend,” jumped in mistaking momentum for value, says Ankur Pahwa, co-founder of early-stage VC firm Peer Capital.
There were fewer opportunities for VC deals this year in the $30 million to $100 million range, says Sreedhar Prasad, an ex-Kalaari Capital investor now advising startups. Several sectors, including AI and deep tech, aren’t mature enough for large investments, he adds.
Better days ahead
However, investors see promising signs for 2025. For one, they are sitting on a huge pile of cash. Local VCs hold $3.4 billion in fresh commitments from the past two years, mostly undeployed.
The number of startup listings in 2024 has given momentum for more IPOs in the new year.
Expected US interest rate cuts — boosting capital flow to growth markets — and higher China investment risks have strengthened India’s appeal, says Arpit Agarwal, a partner at VC firm Blume Ventures.
With more political stability and improving macros, investors might write fatter checks in 2025.
Edited by Azar Zaidi and Victor Loh. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
