Funding Drought: Startup Funding Hits 5-Year Low in January 2024

Attention India
5 Min Read

At the dawn of 2024, startup founders were hopeful for a prosperous year ahead. However, January brought grim news as startup funding plummeted to its lowest point in five years. The total funding secured by Indian startups took a nosedive, dropping to a mere $512 million, marking a staggering 47% year-on-year decline.

Decrease in Deals and Mega Deals

The bleak scenario was further accentuated by a significant decrease in the number of deals, which dwindled from 81 to 68 compared to the previous year. The absence of mega deals, which were a staple in January 2023, added to the distress. Moreover, the funding garnered in January 2024 represented a mere 11% of the $4.5 billion secured by Indian startups in January 2022. This downturn was glaring when juxtaposed with December 2023, where startup funding surpassed $1 billion with 76 deals.

Fintech Continues to Lead

Amidst the funding downturn, fintech startups continued to maintain their dominance in the funding landscape.

Fintech’s Commanding Position

Securing a notable $166 million, Indian fintech startups accounted for a third of the total funding raised in January 2024. The sector also led in the number of funding deals.

Notable Fundraising in Fintech

Significantly, most of the funding was attributed to growth-stage fintech startups. Hyderabad-based NBFC Vivifi India secured $75 million, while Jaipur-based Namdev Finvest raised $15 million in its Series B funding round.

Emergence of Krutrim: A New Unicorn

Despite the overall funding decline, the startup ecosystem witnessed the birth of its 113th unicorn, Krutrim.

Krutrim’s Milestone

Founded by Ola’s Bhavish Aggarwal, Krutrim achieved unicorn status by securing $50 million at a valuation of $1 billion. Notably, this marked India’s first AI unicorn.

Boost to Deeptech Sector

Krutrim’s fundraising also had a ripple effect, bolstering the deep tech sector, which secured $67 million, becoming the second most-funded sector in January 2024.

Other Significant Fundraising Activities

Aside from fintech and deep tech, other sectors also saw noteworthy fundraising activities.

QSR Sector’s Success

QSR startup Wow! Momo secured the third-largest funding of $42 million, with investments from Malaysian Sovereign Fund Khazanah and OAKS Asset Management.

E-commerce Struggles Persist

Despite sporadic success in various sectors, the e-commerce sector continued to grapple with challenges.

ECommerce’s Decline

E-commerce startups managed to secure a mere $45 million across 12 deals, indicating a persistent downward trend. Last year we witnessed a 32% decline in funding, with only $2.6 billion raised compared to $3.8 billion in 2022.

Regional Dynamics: Hyderabad Takes the Lead

In startup hubs, Hyderabad emerged as a frontrunner in January 2024.

Hyderabad’s Ascendancy

Hyderabad surpassed Delhi NCR to claim the second spot in startup funding, amassing a total of $82 million. This surge was primarily fueled by Vivifi India’s $75 million funding round.

Bengaluru’s Continued Dominance

Meanwhile, Bengaluru continued to reign supreme, with startups like Krutrim securing substantial investments, solidifying its position as the top startup hub in India.

Funding Stage Analysis

A closer examination of funding stages revealed interesting trends amidst the funding downturn.

Late Stage Startups Struggle

Late-stage startups bore the brunt of the funding crunch, experiencing a staggering 76% year-on-year decline, plummeting from $611 million in January 2023 to $176 million in January 2024.

Seed Stage Funding Decline

Seed stage funding also witnessed a significant decline, dropping by 64% to $38 million compared to last year’s $104 million.

Growth Stage Resilience

Despite the overall downturn, there was a glimmer of hope for growth-stage startups, with funding increasing by 35% year-on-year to $225 million, up from $159 million in the previous year.

In conclusion, January 2024 painted a bleak picture for startup funding in India, marked by a significant downturn across various sectors and funding stages. While certain sectors like fintech showed resilience, the overall landscape reflected a challenging environment for startups seeking investment.

-Prisha Jaiswal

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