Amidst positive market projections for the upcoming financial year 2024-25 (FY25), Indian startups are gearing up to escalate their investments in advertising and information technology (IT). Based on insights from Inc42’s Indian Startup Founder Sentiment Survey 2023, a significant majority of founders intend to ramp up their advertising budgets by 20-30% and IT expenses by 10-30% in FY25.
Challenges Faced in FY24:
The preceding financial year, FY24, presented numerous challenges for Indian startups, including valuation declines, funding constraints, regulatory changes, and shifting consumer sentiments. Many startups resorted to cash conservation measures, affecting IT spending, leading to salary reductions, and a slowdown in hiring.
Reasons Behind Increasing IT and Ad Spend in FY25:
1. Growth and Scale Aspirations:
With FY25 poised as a period of growth and expansion, startup founders aim to double revenues, expand their customer base, grow their teams, and venture into new markets. Increasing IT and advertising expenditures align with the objectives of optimizing tech-driven processes and enhancing customer visibility and engagement.
2. Expected Increase in Funding:
Forecasts suggest a substantial 36% year-on-year rise in startup funding for 2024, with over 72% of founders seeking funding. The anticipated surge in funding is expected to empower founders to allocate more resources to IT infrastructure and promotional activities.
3. Growth in the Indian Advertising Market:
Indian startups’ plans to escalate advertising spending coincide with the significant growth witnessed in the country’s advertising sector. India has emerged as the 11th largest ad market globally, with digital advertising projected to be a dominant medium for reaching potential customers.
4. Emphasis on Digital Advertising:
As per forecasts by IPG Media’s Magna Global, the Indian advertising market is expected to grow by 11.4% in 2024, with digital platforms continuing their momentum. Indian startups, being inherently digital-native, are poised to leverage digital channels for effective outreach and engagement.
5. AI and ML Driving IT Expenditure:
Gartner, Inc. forecasts India’s IT spending to reach $124.6 Bn in 2024, with a 10% year-on-year increase. A notable portion of this investment is directed towards enhancing AI capabilities, with fintech unicorn MobiKwik earmarking a significant portion of its IPO proceeds for AI and ML investments.
6. Rise of Generative AI (GenAI):
EY CEO Outlook Pulse 2023 reveals that 84% of Indian CEOs are investing in generative artificial intelligence (GenAI), compared to 70% globally. With over 100 native GenAI startups in India, the market is projected to surpass $17 Bn by 2030, presenting significant opportunities for startups across sectors.
In light of the anticipated growth and expansion objectives for FY25, Indian startups are strategically increasing their investments in IT and advertising. With favourable market conditions, increased funding prospects, a thriving ad industry, and advancements in AI and ML technologies, FY25 emerges as the opportune time for startups to amplify their IT and advertising expenditures. As they embark on this strategic initiative, startups aim to leverage these investments to achieve sustainable growth and competitive advantage in the evolving business landscape.