The start-up funding winter may finally be seeing some warmth.
After almost a two-year lull in venture capital (VC) deals, April-June 2024 clocked 200 deals totalling to $3.6 billion, as per data sourced from Venture Intelligence. This represented a 71 per cent increase in investment value from same quarter last year with the deal flow also rising from 189 deals. On a sequential basis too, investment value rose 80 per cent from the March 2024 quarter.
Analysts note that VCs have finally started deploying the large dry powder they are sitting on and there has been increased traction in late-stage deals for start-ups in their growth stages — a segment that had been impacted the most during the last one-and-a-half years. Dry powder denotes the amount of committed, but unallocated capital VC firms have and industry estimates peg it to be around $8-10 billion for India.
The investment value in April-June 2024 was mainly driven by Zepto’s $670 million raise from Lightspeed Venture Partners and others. Even without the Zepto deal, start-ups like Meesho, Pharmeasy, Lenskart and others managed to raise large deals of $280 million, $210 million and $200 million in the quarter.
The uptick in VC action has been particularly sharp in growth and late stages. The amount of growth stage investment in April-June 2024 at $235 million almost doubled year-on-year. Similarly, late stage investment more than tripled at $1.4 billion in the quarter with rise in deal count.
Arun Natarajan, founder and MD, Venture Intelligence, attributes the rise to an increase in average deal sizes across sectors in the April-June 2024 quarter. “Investors have started to selectively support growth-stage companies. Start-ups including some unicorns have accepted the reality of down rounds,” he added.
Biggest spike
With quick commerce emerging as the darling of investors, the overall e-commerce segment saw the biggest increase with investment values rising almost 3X. Software-as-service (SaaS) also managed to attract investors with their Artificial Intelligence (AI) product propositions and emerged as the second biggest sector in June 2024 quarter. AI as a segment saw more deals get sealed but investments were early stage and hence relatively low in value terms.
“While 2022 and 2023 seemed dull, founders kept working on unit economic and improvising the business efficiencies. Money was never an issue, but the valuation matrix was not aligned. The new trend [the pick up in investments] is positive; we expect it to continue for good,” Anil Joshi, founder and managing partner, Unicorn India Ventures, said.
“India continues to be the third largest and one of the most attractive VC start-up ecosystems in the world. The current pick-up in investment pace in early-stage as well as some marquee late-stage deals reflects these sentiments.” Manish Kheterpal, Co-Founder and Partner, WaterBridge Ventures and Vice Chair of VC Council IVCA.
Venture Intelligence’s data considers Seed to Series F investments in companies less than ten years old and late stage tech deals.